Mediation Raises Bar on Settlement Agreements


Although oral agreements can be enforced, when it comes to a court-ordered mediation, as a Missouri title lender recently found out, the agreement had better be in writing and signed, sealed and delivered.

A man, whose first name was Tyrone, brought an action for damages against a Missouri title lender in connection with his purchase of a car from the lender. Tyrone filed a variety of claims, including those under the Missouri Merchandising Practices, for fraud and for breach of contract.

The lender cried foul, however, claiming that the parties had reached a settlement of Tyrone’s claims during a court-ordered mediation The lender contended that Tyrone and his attorney left before signing the final written settlement agreement, after advising the mediator that they would return shortly to sign the final agreement.

The lender stated that the remaining parties, their attorneys, and the mediator waited almost an hour for Tyrone and his attorney to return. When they did not reappear, the mediator, the lender and its counsel signed the agreement. The lender and counsel then left; thus, no written settlement agreement signed by all parties existed.

According to the lender, discussions continued in the week after the mediation, but Tyrone’s attorney repeatedly quibbled with the various drafts of the proposed settlement agreement. The lender then filed a motion to enforce the settlement and sought payment of its attorneys fees.

The trial court granted the lender’s motion to enforce, declaring that all parties of the suit were bound by the terms contained in the settlement agreement which the title lender and the mediator — but not Tyrone — had signed. The trial court, however, denied the lender’s motion for attorney’s fees.

Both Tyrone and the lender appealed to the Missouri Court of Appeals.

Standard of Review

The Appeals Court noted that when reviewing a trial court’s judgment enforcing a settlement, the court would affirm unless the judgment was against the weight of the evidence, there was no substantial evidence to support it, or the court erroneously applied or declared the law.

On appeal, Tyrone claimed that the trial court was wrong in enforcing the settlement agreement. In turn, the lender sought the reversal of the trial court’s refusal to award it its attorneys fees.

Tyrone contended that the court’s enforcement of the settlement violated the Missouri Supreme Court Rule 17.06(c) because the written settlement agreement had not been signed by the parties or their counsel. The trial court order that triggered the mediation specifically directed the parties to participate in mediation under Supreme Court Rule 17.

That rule, which covers the Alternative Dispute Resolution Program, provided in part that all alternative dispute resolution processes shall be non binding unless the parties enter into a written agreement as provided in 17.06(c).

Rule 17.06 provides in part that settlement shall be by a written document setting out the essential terms of the agreement executed after the termination of the alternative dispute resolution process.

The mediation contract executed by the parties specifies:

Mediation Service… Any settlement reached between the parties over the matters at issue shall, in order to be binding, be in the form of a written agreement, approved in writing by the attorneys for the Parties, signed by the Parties and witnessed by the Mediator. If Mediator prepares the written settlement agreement, the parties agree to rely on their own individual judgment and/or that of their respective attorneys in making their decision to enter into any binding settlement agreement… Mediation negotiations, statements and opinions of parties and/or the Mediator are confidential and may not be used in any litigation, civil or criminal proceeding.

It also provided that the contract was intended to be subject to Missouri law including the Missouri Supreme Court Rules, including but not limited to Rule 17.

The title lender acknowledged that the terms of the settlement which the circuit court enforced were agreed to, if at all, during a court ordered mediation conducted pursuant to Rule 17.

Process Non-Binding

It was undisputed, said the Appeals Court, that the parties did not, at any time, “enter into a written agreement setting out the essential terms of the agreement.”…

Inadmissible by Rule

By rule, the back and forth of the parties’ settlement discussions during a court-ordered mediation session are inadmissible as evidence, said the Appeals court.

A motion to enforce an oral agreement purportedly reached during a mediation session will virtually always require, however, that the parties disclose the content of any discussions, and argue about whether those discussions resulted in a binding agreement.

That is exactly what occurred here: both the lender and Tyrone attached affidavits and other documents to their motion papers to substantiate their version of the events that transpired during the mediation, including the statements made by various parties, their counsel, and the mediator.

Those disclosures would appear to be in violation of the clear directive of Rule 17.

During proceedings on its motion to enforce settlement, the lender also moved unsuccessfully for permission to solicit an affidavit or testimony from the mediator concerning events during the mediation.

If oral settlements reached during a mediation session were enforceable, said the Appeals Court, hearing from the mediator would seem to be a natural way of determining whether a final and binding agreement was in fact reached. But such testimony is expressly prohibited by Rule 17.

Under the rule, no individual or organization providing alternative dispute resolution services pursuant to the rule or any agent or employee of the individual or organization shall be subpoenaed or otherwise compelled to disclose any matter disclosed in the process of setting up or conducting the alternative dispute resolution process.

Confidential Discussions

The various provisions of Rule 17, said the Appeals Court, contemplate that discussions during a court ordered mediation process, which culminate in the parties’ agreement to the essential terms of a settlement, are confidential and non binding. Neither the parties nor the mediator may disclose the substance of those discussions.

Once the parties have reached an agreement on the settlement’s essential terms (and on the wording of a writing memorializing those terms), the mediation process concludes, and a written agreement is executed by the parties.

That agreement is admissible as evidence and enforceable, and the parties may present testimony and evidence    including testimony from the mediator concerning the execution of the agreement, the parties’ performance thereunder, and other subsequent events.

The lender correctly notes, said the Appeals Court, that oral settlement agreements have long been enforced under the common law in Missouri. …

The Appeals Court noted that it had not been directed, however, to a case enforcing an oral settlement agreement that was allegedly reached during the course of a mediation conducted pursuant to Rule 17.

Such court ordered mediation proceedings are importantly different from settlement discussions or alternative dispute resolution proceedings in which the parties voluntarily engage.

Under Rule 17, their participation in such a mediation is compelled by court order and subject to judicial oversight. In addition, the participants in a court ordered alternative dispute resolution proceeding may justifiably rely on the unambiguous writing requirement of Rule 17.

Rule 17’s Provisions Govern

In this context, said the Appeals Court, therefore, common law principles that may apply to purely voluntary settlement discussions cannot displace the plain language of Rule 17’s provisions, that were specifically designed to govern proceedings which were a creature of court order and Rule 17 itself.

The Appeals Court noted that, although there may be strong arguments in favor of allowing the enforcement of oral settlement agreements in this context, there are also rational policies furthered by adopting the approach embodied in Rule 17. …

The Appeals Court concluded that Rule 17 meant what it said: the essential terms of a settlement reached during court ordered mediation sessions must be reduced to a written document signed by the parties for the settlement to be enforced.

Given that no such signed document existed here, the trial court’s enforcement of the purported settlement of Tyrone’s claims must be reversed.

Claims Abuse of Discretion

In its appeal, the title lender argued that the trial court abused its discretion in denying its motion for attorneys fees. No statutory or contractual basis existed for a fee award.

The lender nevertheless argued that special circumstances justifying a fee award existed. Tyrone and the lender reached a settlement at the mediation but due to the departure of Tyrone and his attorney before it was signed, the lender was forced to incur additional attorneys fees in its filing of a motion to enforce the settlement to attain closure to the case.

The Appeals Court said that Tyrone correctly took the position that no binding settlement had been reached at the mediation. Without an enforceable settlement, Tyrone was under no legal obligation to execute a written settlement agreement with which he did not agree.

Because the Appeals Court said it had rejected the premise underlying the lender’s request for attorneys fees, the trial court could not have abused its discretion in denying that request.

The Appeals Court therefore reversed the trial court’s judgment and the case was remanded for further proceedings on the merits of Tyrone’s claims.

The Appeals Court noted, however, that its disposition of lender’s appeal should not be read to condone any behavior in which Tyrone or his attorney may have engaged.

Pawnbrokers who would like a free copy of this case sent electronically should send an E-mail to with “Mediation” in the subject line.

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