Williams v. Kansas City Title Loan Co., Inc., 314 S.W.3d 868*
After car buyer entered into mediation on his claims of breach of contract and fraud, among others, against car dealership and other defendants, the dealership moved to enforce a purported settlement agreement. The Circuit Court, Jackson County, Justine E. Del Muro, J., granted the motion and dismissed buyer's claims. Buyer appealed. Dealership appealed the denial of attorney fees.
Plaintiff Tyrone Williams appealed the trial court's enforcement of a settlement purportedly reached at a court-ordered mediation session, and the consequent dismissal of his claims with prejudice. Defendant Westlake Services appeals the trial court's denial of its request for attorney’s fees. Because the settlement Westlake and the other defendants sought to enforce was not memorialized in a written agreement executed by all parties, as required by Supreme Court Rules 17.01(d) and 17.06(c), we reverse the trial court's enforcement of the settlement. Westlake's request for attorney’s fees depended on its claim that Williams had unreasonably refused to acknowledge the existence of a binding settlement agreement. Because Williams was correct that no binding settlement had been reached, Westlake's attorney’s fee motion was properly denied.
Whether or not an oral agreement in mediation is enforceable.
Where the parties are engaged in court-ordered mediation but do not enter into a written agreement, no purported oral settlement can be enforced. Additionally, without satisfying an obligation to enter into a written settlement one cannot be obligated to pay another’s attorney fees.
Tyrone Williams brought an action for damages against a host of defendants in connection with his purchase of a car. Williams asserted a variety of substantive claims, including claims under the Merchandising Practices Act for fraud, and for breach of contract.
Defendant alleged that the parties reached a settlement of Williams' claims during a court-ordered mediation. However, the defendant also contends that Williams and his attorney left the mediation prior to signing the final written settlement agreement, after providing that they would return shortly to sign the final agreement. Defendant stated that the remaining parties, their attorneys, and the mediator waited almost an hour for Williams and Small to return. When Williams and Small did not reappear, the mediator, the defendants, and their counsel signed the agreement. The defendants and counsel then left. No written settlement agreement signed by all parties exists.
According to Defendant, discussions continued in the week following the mediation, but Small repeatedly quibbled with the various drafts of the proposed settlement agreement. Defendant then filed a motion to enforce the settlement, and sought its attorney’s fees. The trial court granted Defendant's motion to enforce, declaring “that all parties of the above-captioned suit are hereby bound by the terms contained in” the settlement agreement which the defendants and the mediator-but not Williams-had signed at the mediation's conclusion. The trial court denied Westlake's motion for attorney’s fees.
On appeal, Williams argued on four separate grounds that the trial court erred in enforcing the settlement agreement. Defendant sought reversal of the trial court's refusal to award it its attorney’s fees. The court found it only needed to address Williams' first point: that the court's enforcement of the settlement violated Supreme Court Rule 17.06(c), because there was no written settlement agreement signed by the parties or their counsel. Because Defendant's attorney’s fee motion depended on its position that a binding settlement existed, the appellate court found that the trial court did not err in denying that motion.
The trial court order which triggered the mediation specifically directed the parties to “participate in mediation pursuant to Supreme Court Rule 17.” Rule 17 provides in relevant part that, “All alternative dispute resolution processes shall be non-binding unless the parties enter into a written agreement as provided in Rule 17.06(c). A written agreement shall be binding to the extent not prohibited by law.” Additionally it states, “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.”
Further consistent with Rules 17.01(d) and 17.06(c), the mediation contract executed by the parties specified that the settlement needed to be in written form and signed by both parties’ attorneys.
Defendant 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. It was undisputed that the parties did not, at any time, “enter into a written agreement” “setting out the essential terms of the agreement.” Given the absence of a written settlement agreement executed by Williams, the mediation process in which the parties engaged was “non-binding” under the express direction of Rule 17.01(d). The court rejected Defendant’s argument that not all parties need to sign the agreement under the circumstances, and by doing so took a strong plain language stance. The court also found that the back-and-forth of the parties' settlement discussions during a court-ordered mediation session are inadmissible as evidence. 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 such discussions, and argue as to whether those discussions resulted in a binding agreement. Those disclosures, like the ones in the case, would appear to be in violation of the clear directive of Rule 17.06(a).
During proceedings on its motion to enforce settlement, Defendant also moved (unsuccessfully) for leave to solicit an affidavit or testimony from the mediator concerning events during the mediation. If oral settlements reached during a mediation session were enforceable, 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 17.06(b), “No individual or organization providing alternative dispute resolution services pursuant to this Rule 17 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.” The court was clear to explain that the written settlement agreement could be disclosed under the rule, and that also under the rule the mediator's confidentiality obligations do not apply to testimony concerning the circumstances surrounding the execution of the written settlement agreement itself (or subsequent events), in a proceeding to enforce that written agreement.
The court summarized that 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.
Defendant attempted to draw a similarity between common law oral agreements and the agreement involved in their case. The court was quick to differentiate the situations by stating that mediation is court ordered, and adheres to a strict set of written rules. Additionally, while the court recognized the strong common-law tradition, it provided that reducing the essential terms of a mediation agreement to writing would prevent the sort of “he said, she said” disputes that occurred in the case whichcosti the parties and the courts both time and money, protect the confidentiality of mediation proceedings from inevitable erosion if parties are permitted to attempt to prove up oral agreements reached during mediation, ensure that the litigants have in fact agreed to particular settlement terms, and ensure that the litigants, including represented and unrepresented individuals, fully understand and accept the consequences of those terms.
The court held that Rule 17 means what it says: the essential terms of settlements reached during court-ordered mediation sessions must be reduced to a writing signed by the parties in order for such settlements to be enforced. Given that no such writing existed in the case discussed, the trial court's enforcement of the purported settlement of Williams' claims was reversed.
With regards to the attorney fee issue, Williams correctly took the position that no binding settlement had been reached at the mediation. Without an enforceable settlement, Williams was under no legal obligation to execute a written settlement agreement with which he did not agree.
*Case Summary written by Chris Santagate, Class of 2012