Don’t Sign on the Dotted Line – Unless You’re the Client

By Luke J. Farley, Sr. 

We’ve all been there: you’ve been mediating all day, it’s 5:30 p.m. (or later), the parties just (finally) came to terms, and everyone is ready to go home. The mediator whips out a form, jots down the basic terms of the settlement, and hands you the form. You reach for your pen, and then ask yourself, “Shouldn’t my client be the one signing this?” Considering the increase in remote mediations since the start of the pandemic, there’s a good chance you and your client aren’t even together in the same room — or the same state. So do you sign? The North Carolina Court of Appeals just answered that question for you. After the decision in Mitchell v. Boswell, No. COA19-1077, 2020 WL 6437278 (N.C. Ct. App. Nov. 3, 2020), your client should definitely be the one signing the form.

The issue in Mitchell v. Boswell was simple: does a party need to sign a settlement agreement for it to be enforceable under the mandatory superior court mediation statute, G.S. 7A-38.1, et seq.? In the case, the parties held a mediated settlement conference though neither was physically present because they were out of state at the time; instead, they participated by phone. Someone, probably one of the lawyers, drafted a short memorandum of settlement which included the basic terms of the deal; a more formal agreement was to follow later. The settlement memo was signed at the mediation by the mediator and the lawyers for the parties. The defendant later refused to sign the formal settlement agreement. The plaintiffs moved to enforce the terms of the settlement memo as the parties’ binding agreement. The trial court granted the motion. The defendant appealed, arguing that under G.S. 7A-38.1(l), a settlement agreement must be “signed by the parties against whom enforcement is sought.” The court of appeals agreed, determining that the plain language of the statute required the parties, not authorized agents, to sign. The decision of the trial court was reversed.

The rule established by Mitchell v. Boswell is clear: any settlement agreement that comes out of a mandatory mediated settlement conference in superior court must be in writing and signed by the parties themselves, not a lawyer or any other authorized agent. (Query though whether the case might have come out differently had the defendant been a corporation instead of an individual. Corporations, as non-natural persons, can only act through agents. Perhaps this might have caused the court to understand “party” differently.)

The decision in Mitchell v. Boswell points to a bigger question for construction lawyers: should we be using short form settlement agreements at all? The short forms often used in mediation seem to contemplate a simple case, perhaps a car wreck, where the defendant pays the plaintiff X dollars in Y days and the plaintiff dismisses its claims. But construction disputes are rarely that simple. They’re often multi-party affairs with complex issues of lien priority, lien cancellation, release of bonds, indemnification, joint checks, payment to third parties, assignment of claims, etc., etc. Resolving these issues is often material to the deal and can rarely be done well in a short-form agreement. Instead, the better practice may be to avoid memo agreements all together in your construction case. One approach is to take time before the mediation and put together a draft settlement that addresses the key issues in the case and then fill in the details at mediation once the parties reach terms. Then, all that’s left to do is print and (have the client) sign.