Settlement Provision Conferred Limited Authority On Arbitrator to Amend Settlement Agreement to Make It Enforceable
A cleverly drafted settlement provision, which had implications for the res judicata effect of an arbitration award, and for the confidentiality of mediation, is the reason this next case earns a blawg post. The underlying dispute was a messy partnership buyout and accounting, complicated by the defendant’s misstatement of his authority to bind a group of real estate businesses to the settlement. (One who signs as an agent can take on liability if authority is lacking). Litigation led to mediation, followed by arbitration, followed by a bifurcated bench/jury trial, followed by cross appeals. Kurtin v. Elieff, Case No. G043999 (4th Dist. Div. 3 June 27, 2012) (Rylaarsdam, Acting P.J., author) (published). The Court of Appeal affirmed most of the trial court’s judgment, with some interesting analysis of a settlement provision resulting from the mediation. (Famed mediator Tony Piazza was involved).
Arbitration/Res Judicata
The settlement resulting from mediation included a clever provision addressing a bedeviling problem – how to efficiently handle settlement enforcement problems resulting from ambiguity:
“The sole act of the arbitrator shall be to issue an amendment to this Settlement Agreement implying such additional terms, curing any ambiguity or otherwise curing any defect in the Settlement Agreement that would make this Settlement Agreement unenforceable.” (italics in the opinion).
Defendant Elieff contended that an arbitration decision that followed the mediation/settlement precluded the subsequent civil court judgment by way of res judicata or collateral estoppel. However, the Court of Appeal rejected that argument, because of how severely the settlement agreement limited the power of the arbitrator. All the arbitrator could do was clear up ambiguity or defects in the settlement agreement to make it enforceable. It followed that the res judicata effect of the arbitrator’s decision was limited.
Mediation/Confidentiality
Defendant Elieff also argued that Kurtin’s invocation of the mediation privilege, which made it impossible to bring in extrinsic evidence from the mediation to interpret the settlement, denied Elieff a fair trial. Once again, however, the settlement agreement provided the answer:
“The mechanism set up by the settlement agreement was one where the parties first would resolve any ambiguities in the contract before going to court. Thus, in asserting the mediation privilege, Kurtin was only following the settlement agreement’s own logic, not sandbagging Elieff.”
Tip: The settlement provision here is one to keep in mind if you are concerned that enforcement of the settlement agreed to in mediation may be difficult because of some unforeseen ambiguity or defect.
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