As times have changed, so has the way we resolve disputes. These days mediation has become a very popular method of settling New Jersey divorces. Proponents believe that mediation is a quicker and more efficient way to settle contested matters. But of course like all dispute resolution, it does have its downfalls. During the mediation session, both parties will have their attorney present plus a neutral mediator will be appointed. In New Jersey, whatever is discussed during the mediation session is confidential and privileged from being disclosed. However, the parties involved in the mediation are entitled to waive that privilege. Yet what about the mediator? Can he or she be compelled to testify on confidential communications during mediation? The case of Willingboro Mall, Ltd. v. 240/242 Franklin Ave., L.L.C., 215 N.J. 242 (2013) discusses this red-hot issue. Let’s explore.
In the case Willingboro, the owner of Willingboro Mall, sold the mall property to Franklin. Afterwards, Willingboro filed a mortgage foreclosure action on the property. As a result of this, the judge directed the parties to engage in non-binding mediation. The mediation began in November 2007. Franklin offered $100,000 to Willingboro on the condition that it received settlement of all claims and for a discharge of the mortgage on the mall property. Willingboro’s manager Plapinger orally accepted the deal in front of the mediator and said he was granting authority for his lawyer to enter into the settlement. The specific terms of the settlement were not in writing thought before the mediation session was over.
A few days later, Franklin forwarded the judge and Willingboro a letter stating that the case was settled and what the final terms were. Additionally, Franklin’s lawyer sent a letter to Willingboro stating that he held $100,000 in his attorney trust account to fund the settlement and that the money would be distributed when Willingboro filed a stipulation of dismissal in the foreclosure action and delivered the mortgage discharge. Franklin thus filed a motion to have the settlement agreement enforced and attached a certification from its lawyer and the mediator that described the confidential communications made during the mediation session.
After Franklin filed the motion, Willingboro requested an evidentiary hearing and the taking of discovery. The trial court ordered discovery and scheduled a date for the hearing to determine the enforceability of the agreement reached in mediation. Both parties agreed that they waived any issues of confidentiality with respect to the mediation process. Furthermore, the parties agreed that the testimony gathered could be utilized for purposes of the motion to enforce the agreement. Even though the parties waived the issues of confidentiality, the mediator refused to testify unless the judge ordered so.
The judge looked to N.J. Court Rule 1:40-4(d), stating “unless the participants in a mediation agree, no mediator may disclose any mediation communication to anyone who was not a participant in the mediation.” Since the parties agreed to the disclosure, the mediator was deposed and compelled to disclose the mediation communications. The judge proceeded to conduct the evidentiary hearing. During the hearing, Willingboro moved for an order obliterating all confidential communications disclosed, stating that mediation communications are privileged under the New Jersey Uniform Mediation Act and Rule 1:40-4. The trial judge held that Willingboro had waived the mediation communication privilege and that a binding settlement agreement was reached as a result of the mediation session. The Appellate Division affirmed. The Supreme Court of New Jersey granted cert.
The New Jersey Supreme Court held that Willingboro did waive the mediation communication privilege in this instance. However, the court made it very clear that going forward, a settlement reached at mediation but not confirmed in writing would not be an enforceable agreement. Since the Willingboro decision was reached, mediation has been a red-hot issue especially in the context of family law. For more information on selecting mediation to settle your disputes, please contact my office today.