ADR CORNER
ADR CORNER
Don’ t Forget the Non-Monetary Terms
WILLIAM J. CEA
Mediation typically focuses on the negotiation of payment of a dollar amount. Parties often spend all day negotiating that term alone. In addition to having a standard settlement agreement handy to close a deal, I recommend counsel discuss the“ non-monetary” terms with clients in advance of mediation. The non-monetary terms are sometimes brought up almost as a given or an afterthought. That may risk a deal, however, if the terms are material or considered“ dealbreakers”.
Non-monetary terms may include releases, reserved or carved out rights, time for making payments, remedies in the event of default, indemnification, assignment of rights, confidentiality / non-disparagement, or the impact on non-parties and / or separate litigation. These are just some examples of terms that I see brought up. In my experience, if the parties are getting sufficiently close in a monetary negotiation, it makes sense to put any material nonmonetary terms on the table sooner than later.
Most of us have likely participated in a mediation where non-monetary terms are brought up for the first time after the parties think they have reached a settlement. Waiting until that point in the process, when parties are already fatigued, risks the negotiation going backwards. Much the same way people grow weary if they are not prepared to stay longer for an agreement to be prepared, reviewed and executed, the dreaded“ just one more thing” may disturb the apple cart.
For example, an owner sues a contractor for construction defects. The parties spend all day negotiating a dollar amount to be paid to an owner to make repairs. What if the building is relatively new and there are still warranty rights that the owner has? If the contractor at the last minute says that the offer to settle is contingent on getting a full release of all claims, including latent or“ unknown” defects, it could blow the deal.
If there is an expectation on the part of the contractor that it will receive a full release or a clean break from the project, it makes sense to bring that up as the negotiations are progressing.
How about confidentiality? Can both parties even agree to it? For example, in the case of condominium or homeowner’ s associations, settlement agreements are generally official records of the association and subject to unit owner records requests. On the other hand, can an association’ s board agree to what it will say if asked about a resolution? That may be something that an association can agree to.
On the other hand, if there is animosity between the parties, requesting a nondisparagement clause may be considered a material term requiring additional compensation. Again, if your client expects a specific term, it makes sense to bring this up before the end of the day.
What if a defendant paying money wants to reserve the right to seek indemnification, subrogation or other relief against a nonparty? Will that cause any exposure to the plaintiff, such as being brought back into litigation as a third-party defendant? In that case will the plaintiff want to be held harmless and indemnified for the exposure? Thinking through the practical and legal implications of such a carveout in advance of mediation and discussing them along with monetary terms may be important.
As to the money, will your client need time to make payment? I think the general expectation is that a plaintiff will be paid within 30 days of settlement. If your client needs an extended amount of time to make payment or multiple payments, it may impact a plaintiff’ s willingness to accept the total amount. At what point in the day does it make sense to bring this up? Not after the plaintiff believes a deal has been reached. Once a plaintiff has negotiated all day down to its bottom line, the defendant revealing it needs a year to make payments is material. Counsel should think about when it makes sense to bring up payment terms during the negotiation.
The above is not intended to be an exhaustive discussion of non-monetary terms. Hopefully, these examples will provide food for thought and assist you with preparing for mediation. No one wants to see a deal go sideways. Planning and bringing the non-monetary terms up at the right time are important. Just like having a proposed settlement agreement form ready to go, addressing the non-monetary terms when it makes sense in the negotiation process can go a long way to preventing one or more parties throwing in the towel after a long day.
William J.(“ Bill”) Cea, Esq. is a Florida Supreme Court Circuit Certified Mediator and Florida Bar Board Certified Construction Attorney. Bill was admitted to practice law in Florida in 1992 and Certified as Mediator in 2011. He may be contacted via email: wjc @ inkedmediation. com or phone( 954) 494-3239, or via Inkedmediation. com.
For additional ADR tips and resources, go to: https:// www. palmbeachbar. org / alternativedispute-resolution-committee
PBCBA BAR BULLETIN 7