Crafting Effective Settlement Agreements

By Ishikawa, Brendon, Crafting Effective Settlement Agreements — A Guidebook for Attorneys and Mediators
(American Bar Association, 2018), 408 pages plus a 29-page appendix

Book Review by L. Steven Emmert

Most guidance on mediation focuses on the difficult task of convincing intransigent, warring parties to reach an agreement on some middle ground. But the agreement itself is only an interim step in the process. For the overwhelming majority of mediations, the real objective is to fashion and execute a settlement in writing.

A new book published by the ABA’s sections on Business Law and Dispute Resolution aims to address this final step. Describing Crafting Effective Settlement Agreements as a work that “begins where most mediation trainings leave off,” Brendon Ishikawa has written a treatise dedicated to the essential task of putting an oral understanding into written form. Ishikawa is a California appellate lawyer and mediator who recently co-authored another ABA book, that one on appellate mediation.

The substance of Ishikawa’s new book begins with a chapter comprising ten principles that underlie the mediator’s and the lawyer’s task. The most important of these principles, and correspondingly the longest subchapter in the book, is “Preparation Is Essential for an Effective Settlement Agreement.” This section includes the observation that many advocates come to a mediation prepared to negotiate, but wholly unprepared to succeed at negotiation. That is, they approach the session with the expectation that the case won’t settle — likely a form of defensive lawyering — and then are surprised when it does. Those lawyers are caught flatfooted when it suddenly — and often quite late into the evening — becomes necessary to memorialize an unexpected agreement.

The solution is to start working on the settlement agreement well before you gather. One particularly valuable approach is for the lawyers to generate and circulate in advance a draft written agreement. The parties can in this way consider fully the boilerplate terms that each expects, hammering out any differences so there are no post-agreement surprises.

Sharing drafts in advance can help to hold a fragile settlement together. For example, if no party mentions confidentiality during the mediation session, but a later draft includes such a provision on the basis that one party’s lawyer “figured that that was understood,” a rift may arise that threatens the entire accord. Reviewing each other’s drafts in advance can avoid nasty surprises like that.

The book next discusses lawyers’ and mediators’ typical response to an unanticipated accord: the “preliminary settlement agreement,” sometimes called a term sheet or a memorandum of agreement. This is often a hastily drafted set of bullet points that the parties write in longhand and then initial, expecting to supplant it with a fleshed-out settlement agreement after their lawyers hash out the details. Ishikawa offers suggestions for both binding and nonbinding preliminary agreements – the latter sometimes constitute an agreement to negotiate further, or an “agreement to agree” – but he understandably concludes with a warning that they are too often “traps for the unwary.” The better approach, he urges, is to go straight to the final agreement, with the parties all still in the room.

The heart of the book, Chapter 4, explores how best to craft a written settlement agreement. There are suggestions for prefatory matter, such as the names of the settling parties, the nature of the settled claims, and the effective date. Another section explores payment terms and mechanisms where the settlement calls for the payment of money. And the chapter includes a key section explaining how to prepare an effective and unambiguous release or covenant not to sue.

Another interesting subchapter lists provisions that Ishikawa believes drafters should omit. This includes some familiar terms, such as a severability clause or an admonition to each party to read the entire agreement before signing. The former can cause disastrous consequences if a court invalidates one key term but holds the beneficiary of that term to a now-lopsided agreement. And better than a “read this!” clause is a statement that the parties used a media-tor and have had ample time to consult independent counsel before signing.

Later chapters include checklists, ethical considerations, and a thoroughly predictable warning against the use of oral settlement agreements.  An appendix offers four template agreements for different kinds of disputes.

At $119.95, the book doesn’t seem cheap; but in context, it is, especially if you frequently mediate disputes.  If the book’s sensible suggestions save the reader from even one exploded agreement, it will have paid for itself many times over.

Steve Emmert is an appellate lawyer at Sykes, Bourdon, Ahern & Levy in Virginia Beach.  He is a certified appellate mediator and the publisher, since 2005, of the website Virginia Appellate News & Analysis.