Opinion ID: 853007
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Heading Rank: 2

Heading: The Effect of Mediation Settlement Agreement

Text: Jackson does not argue that his attorney lacked the actual authority to enter into a settlement at the mediation. Rather he contends that ADR Rule 2.7(B)(2), which requires the parties to be present at a mediation, rendered unenforceable any settlement in Jackson's absence. We agree that the rule required Jackson's presence, but do not agree that his absence invalidates his attorney's agreement to settle the case. In Koval v. Simon Telelect Inc., 693 N.E.2d 1299 (Ind.1998), this Court held that an attorney has the inherent authority to bind a client in an in court proceeding, and a mediation session under the ADR rules is in court for this purpose. Id. at 1306-07. Jackson attempts to distinguish Koval because Koval did not involve a mediation conducted in violation of the ADR rules. The violation Jackson cites is Jackson's own failure to attend the mediation. As Chief Judge Brook observed, a party may not take advantage of errors of its own making. Jackson further distinguishes Koval on the basis that Koval did not involve a mediation under the ADR rules. Koval expressly did not differentiate between settlement agreements made within or outside the scope of the ADR Rules. It was not clear from the record in Koval, which was a certified question from the federal court, whether the mediation was ... administered ... pursuant to ... or ... wholly outside the rules. Koval, 693 N.E.2d at 1307 n.12. But the opinion in Koval made clear that the authority of the attorney depended on whether the proceeding was governed by the ADR Rules. If so, the proceeding is in court for purpose of the doctrine that an attorney appearing in court has inherent power to settle the case. There is no dispute that the mediation was under the ADR Rules in this case. Accordingly, under Koval, the attorney at the mediation session had inherent authority to settle. But this presents no issue in Jackson's case because actual authority is conceded. The issue is not whether the attorney was authorized, but whether, despite that authority, the settlement is unenforceable because of Jackson's absence. Indiana strongly favors settlement agreements. Scott v. Randle, 697 N.E.2d 60, 65 (Ind.Ct.App.1998). And it is established law that if a party agrees to settle a pending action, but then refuses to consummate his settlement agreement, the opposing party may obtain a judgment enforcing the agreement. Klebes v. Forest Lake Corp., 607 N.E.2d 978, 982 (Ind.Ct. App.1993); Brant Constr. Co. v. Lumen Constr. Inc., 515 N.E.2d 868, 876 (Ind.Ct. App.1988). Settlement agreements are governed by the same general principles of contract law as any other agreement. Ind. State Highway Comm'n v. Curtis, 704 N.E.2d 1015, 1018 (Ind.1998). Jackson argues for an exception to this principle for agency doctrines incident to settlement agreements reached at mediation sessions. Under basic principles of agency law Jackson is bound by the settlement agreement. The Restatement (Second) of Agency states that: If an agent of a disclosed ... principal makes an authorized contract with a third person, the liability of the principal thereon depends upon the agreement between the agent and the other party as to the parties to the transaction. Restatement (Second) of Agency, § 146 (1958). The Restatement further states that [u]nless otherwise agreed, a disclosed... principal is a party to a contract... made by his agent within his authority. Id. at § 147. In this case it is undisputed that Jackson's attorney had the authority to settle, and of course Jackson, the principal, was disclosed. Jackson contends that an attorney's authority to bind the client to a settlement agreement is nevertheless constrained by ADR Rule 2.7. He contends that ADR Rule 2.7(B)(2) invalidates settlements entered into under mediations pursuant to ADR Rules if a party is not present and refuses to sign an agreement reached by the party's authorized attorney. We do not agree that Rule 2.7 suggests that result. The purposes of the requirement that parties and their attorneys be present at a mediation are several fold. They include assuring that the authority to settle is available at the mediation, but they also include facilitating settlement by creating an environment where the parties and their attorneys hopefully receive and appreciate the points of view of the other parties and the mediator. ADR 2.1 (role of mediator is to assist parties in exploring areas of compromise, and finding points of agreement ....); State v. Carter, 658 N.E.2d 618, 623 (Ind. Ct.App.1995) (goals of mediation include identifying areas of agreement and reducing misunderstandings). Thus, even if no settlement is agreed, the understandings reached may facilitate a settlement in the future. Attendance at the mediation may help to elevate the parties' sense of the fairness of the proceeding, and that purpose is frustrated if an agreement is reached in their absence. But to permit a party to avoid an agreement by failing to attend is to reward disregard of the rules. If an agreement is reached at the meeting, these purposes are fully served even with a party's unexcused absence. For that reason, and the strong policy in favor of settlements, we hold that although the agreement may be vulnerable to other attacks, if an attorney agrees in writing at a mediation session to settle a claim, neither the presence of the client nor ratification by the client is required to bind the client to the settlement agreement. The attorney faced with an absent client can of course refuse to agree. That risks exposure to the penalties for nonattendance or lack of authority that are provided in ADR Rule 2.10, but that course is ordinarily preferable to incurring an obligation on the part of the client to which the client did not agree. If, as here, the issue is not lack of authority, but a mistaken assumption that led the client to confer actual authority, the grounds for relief from that circumstance are found in bodies of law other than the ADR Rules. Jackson also challenges the validity of the agreement because it was not signed by the parties. ADR Rule 2.7(E)(2) states that [i]f an agreement is reached, in whole or in part, it shall be reduced to writing and signed by the parties and their counsel. This Court has emphasized the importance of reducing any agreement reached to a signed written agreement. In Vernon v. Acton, 732 N.E.2d 805 (Ind. 2000), we stated that: Requiring written agreements, signed by the parties, is more likely to maintain mediation as a viable avenue for clear and enduring dispute resolution rather than one leading to further uncertainty and conflict. Once the full assent of the parties is memorialized in a signed written agreement, the important goal of enforceability is achieved. Id. at 810. The requirement of signature by the attorneys and parties is designed to avoid disputes over what was or was not agreed to at the mediation. Subsequent cases interpreting Vernon have reached the same conclusion. Spencer v. Spencer, 752 N.E.2d 661, 664 (Ind.Ct.App.2001); Reno v. Haler, 734 N.E.2d 1095, 1098 (Ind. Ct.App.2000). Thus there is no disputing the importance of a signed settlement agreement. The Rule's provision that the agreement is to be signed by both the attorney and the party is consistent with the requirement of ADR Rule 2.7(B) that both the attorney and the party are to be present. Nevertheless, where the agent of the party is cloaked with the authority to enter into the settlement agreement, and the party's presence is unexcused, the attorney's signature is sufficient. To hold otherwise would give an incentive to frustrate the mediation by boycott in hopes of renegotiating after the mediation in return for the signature of the absent party. That action would of course be sanctionable under ADR Rule 2.10, so it is not risk-free. But we see no reason to reward or create an incentive to disregard the rules by permitting the improperly absent party, Jackson, to turn his absence to his advantage. In any event, it seems that Jackson's presence at the mediation would have made no difference. At that time both Jackson and his attorney were under the impression that the policy limit was $100,000. Jackson offers no reason to believe that had Jackson been present at the mediation there would have been no agreement, or that he would not have signed the written settlement agreement along with his attorney. We recognize that enforcing the settlement agreement gives Defendants' insurer a windfall due to opposing counsel's misunderstanding as to the applicable insurance limits. In this appeal the only issues raised are the effect of Jackson's absence from the mediation. We are not presented in this appeal with the contentions Jackson advanced in the trial court for avoiding the agreement based on that misunderstanding. We note, however, that because the August 2 order was not a final judgment, Defendants are not correct that any motion for reconsideration [3] needed to be filed within thirty days. Hubbard v. Hubbard, 690 N.E.2d 1219, 1221 (Ind.Ct.App. 1998) (a trial court may reconsider previous orders until final judgment is entered). In sum, we hold that when an attorney attends a mediation under the ADR Rules and executes a settlement agreement, that is sufficient to bind the client who fails to attend without excuse.