Be Wary of “Binding Mediation”
May 15, 2018
Over the last 100 years, High Swartz attorneys have engaged in countless cases involving alternative dispute resolution, representing litigants in arbitrations and mediations and serving as arbitrators and mediators. Recently however, I have noticed a newer concept being incorporated into contractual provisions and settlement discussions: “binding mediation”. Such a provision raises immediate questions. What is binding mediation? Is this something that a party should agree to?
While not widely used, or even widely known about, binding mediation is a form of alternative dispute resolution. Alternate dispute resolution is, generally speaking, a collection of methods of resolving disputes outside of court. In the arbitration method of alternate dispute resolution, the parties conduct a evidentiary hearing before a neutral arbitrator, or panel of arbitrators, that decides the case as would a judge and jury. Except in very limited circumstances, and unless the parties expressly agree otherwise, the parties are bound by the arbitrator’s decision, and there are very limited rights of appeal. The arbitrator’s decision can be entered as a judgment in court, the judgment can be enforced, and assets of the losing party can be seized to satisfy the judgment In a mediation, there is no evidentiary hearing. A neutral mediator listens to the various positions of the parties and facilitates their settlement discussions. In mediation, there is no “decision” to be binding. The culmination of the mediation is either a settlement acceptable to both parties, a partial settlement acceptable to both parties, or the parties leave without their dispute resolved.
“Binding mediation” therefore would seem to be a contradiction in terms, and is often discarded as a viable option. There is no statutory definition or even universal understanding of what binding mediation even means. Some consider it to be a traditional mediation, except that the parties are expressly bound by any agreement they reach. Others consider it to be a traditional mediation, but if the parties do not settle, the mediator determines the final settlement somewhere at or between the final positions of the parties. Still others believe it is simply another term for arbitration.
Case law highlights that the term is vague. In Pennsylvania, the Superior Court addressed binding mediation in its unreported decision Miller v. Miller, 2016 WL 6301602 (Pa.Super. 2016), when it found that because the parties used the word “binding” it meant that they were agreeing to an arbitration, despite the use of the word “mediation.” In Connecticut, the Appellate Court found in the case of Tirreno v. The Hartford, 129 A.3d 735 (Conn.App.Ct. 2015) that binding mediation was not an arbitration, and thus not subject to that state’s Arbitration Statute, particularly since there was no hearing. However, the mediation decision in Tirreno was nonetheless found binding in the context of a petition to enforce a settlement that was pending was before the court.
While there is no clear accepted definition, what is clear is that if you are going to enter into a binding mediation agreement, simply referencing the process by name is not sufficient to protect your rights. You must clearly set forth how the process will be conducted, how the decision will be treated, and how the decision will be enforced.
Is it a good idea to enter into a binding mediation agreement? Since you are potentially giving up your rights to a hearing, to examine and challenge evidence and the ability to cross examine witnesses, it would seem that it is rarely a good choice, particularly in an agreement addressing prospective disputes. However, binding mediation may be appropriate in some circumstances, such as when a dispute has arisen, there are relatively few material facts in dispute, there is a clear mutual understanding of each party’s positions and the scope of the mediator’s authority (such as monetary limits) is clearly defined.
If you have any questions about binding mediation, please contact Richard C. Sokorai at 610-275-0700 or firstname.lastname@example.org. Our Bucks County and Montgomery County Litigation attorneys have knowledge and experience in all facets of arbitration and mediation.
The information above is general: we recommend that you consult an attorney regarding your specific circumstances. The content of this information is not meant to be considered as legal advice or a substitute for legal representation.