Chapter 24 - § 24.4 • SETTLEMENTS IN MEDIATION

• Jurisdiction: Colorado

§ 24.4 • SETTLEMENTS IN MEDIATION

The Dispute Resolution Act, C.R.S. § 13-22-301, governs settlement agreements in mediations. A possible exception is mediations annexed to the federal court.

§ 24.4.1—Requirement Of Executed Written Settlement Agreement

In National Union Fire Insurance Co. of Pittsburgh, Pennsylvania v. Price,²¹ the parties applied C.R.S. § 13-22-308 of the Dispute Resolution Act in determining the enforceability of a settlement reached in mediation:

If the parties involved in a dispute reach a full or partial agreement, the agreement upon request of the parties shall be reduced to writing and approved by the parties and their attorneys, if any. If reduced to writing and signed by the parties, the agreement may be presented to the court by any party or their attorneys, if any, as a stipulation and, if approved by the court, shall be enforceable as an order of the court.²²

The court held that an oral agreement reached in a private mediation could not be enforced. The court stated that the Act applies to all mediation or dispute resolution programs conducted in the state, including those conducted by a private mediator.

National Union was substantially overruled by the Colorado Supreme Court in Yaekle,²³ holding that:

Section 308 of the Act provides parties engaging in mediation with a method for turning a mediated settlement agreement into an order of court, but does not outline the only way by which a binding agreement can be formed.²⁴

[S]ection 13-22-308 is not the exclusive means by which parties can form a binding agreement reached after mediation, but that section 13-22-307 protects as confidential those communications made in the presence or at the behest of the mediator. Thus, while common law contract principles are not suspended from operation during mediation, the evidence of contract formation during mediation other than final written and fully executed agreements is generally inadmissible.²⁵

Thus, § 308 does not abrogate the common law of contracts with respect to validity of settlement agreements reached in mediation. However, § 307 may prevent admission of the evidence needed to prove a common law agreement, because the needed evidence is privileged.

GLN Compliance Group, Inc. v. Aviation Manual Solutions, LLC,²⁶ was first decided on October 16, 2008, just four days before Yaekle. After Yaekle was decided, the court of appeals withdrew its decision and on January 15, 2009, issued a new unpublished decision.²⁷

The facts were as follows: During mediation held in August, the parties appeared to have agreed upon a settlement. The attorneys indicated the settlement agreement would be reduced to writing and signed by the parties. The mediator asked the parties to make a record of the terms before a court reporter. The mediator began the record by stating that a settlement had been reached, that the purpose of the record was to put the agreement on the record, and that a formal record would be prepared for signature of the parties. The attorneys then stated a summary of the agreement that had been reached. The mediator asked the parties a series of questions to be sure they understood the agreement. The parties confirmed their understanding of and agreement to the terms. The attorney for the defendant, Aviation, agreed to prepare and circulate a draft of the agreement. Thereafter, Aviation sent GLN a check in payment of the settlement amount. GLN negotiated the check before any written agreement was signed, although it had earlier agreed not to negotiate the check until the settlement agreement was signed.

In September, GLN's attorney asked Aviation's attorney for a draft of the settlement agreement, which Aviation's attorney then provided. GLN refused to sign, and GLN sent a derogatory letter to Aviation's attorney. In October, GLN's attorney moved to withdraw on grounds of irreconcilability with his client. Over GLN's objection, the court allowed the attorney to withdraw.

In the proceeding to enforce the mediated settlement, Aviation contended GLN expressly agreed to the settlement, which was reflected by accepting Aviation's performance of elements of the agreement, including cashing the settlement payment check, and by the statements on the record. GLN urged it did not agree because the agreement did not provide sufficient future protection for GLN's confidential information.

The trial court enforced the agreement, finding that stating the...