By David W. Henry
This article aims to identify and cure a species of mediation malpractice. The putative error or species of mediator malpractice (so to speak) is in allowing the parties to create a document that purports to resolve the dispute but which in truth is an unenforceable agreement to agree. “Agreements to agree” resemble contracts but they require the parties to agree to something else in the future or contemplate the parties will agree on the terms of a second document to be executed later. It is axiomatic that agreements to agree are unenforceable, but trial courts favor settlements and want the agreement to survive.
Let us consider a common “agreement to agree” problem which occurs during mediation. At the end of a long day the parties create a short putative agreement with stated consideration that importantly contemplates the execution of a “release” invariably required by defense counsel or the insurer to avoid future claims. This release will include the mediation participants/defendants but also their officers, directors, employees, agents, etc., and could frequently include hold harmless and indemnification language regarding liens or subrogated interests, Medicare language and indemnity, confidentiality, prevailing party attorneys’ fees for breach, and a release of any other claims from the “beginning of the world” to the date of the instrument. In employment cases you may see other non-economic terms cryptically referred to as “no trespass/no re-hire,” non-solicitation of employees or clients, or other restrictive covenants. Usually the release terms are anticipated, and the Plaintiff signs it with little or no substantive changes. But what happens when the “release” terms are not agreed, and the parties cannot agree on the finalized terms? This is a bad situation for one side, but frequently both. Mediation was intended to extinguish litigation not create more.
The Plaintiff has legitimate objections to certain terms in the release but wants to be paid. The Defendant has the check in hand but needs finality and non-economic deal terms. The Plaintiff may file a Motion to Compel Enforcement of the short form term sheet or a Motion for Sanctions, or some other similarly titled motion.
Does the Court presiding under the underlying tort case have jurisdiction to hear the motion from either side and under what rule is the motion brought? No. For the Court to enforce the agreement upon motion, the parties would have had to incorporate the alleged settlement agreement into a final judgment or order and only then would the court have jurisdiction to enforce its own orders or judgments. Paulucci v. General Dynamics Corp., 842 So. 2d 797, 803 (Fla. 2003); MCR Funding v. CMG Funding Corp., 771 So. 2d 32 (Fla. 4th DCA 2000). The court cannot rely on its inherent power to enforce its own orders since there is no judgment or order for the court to enforce. MCR Funding, 771 So. 2d at 35. The “Friday afternoon” short form agreement is not before the court.
In MCR Funding, the parties entered into an out-of-court settlement agreement which was neither filed with the trial court nor specifically approved by order of the court. Id. at 33. The court found that but for MCR’s affirmative request for the trial court to enforce the out-of-court settlement agreement, the trial court would not have had jurisdiction to enforce the settlement:
The filing of the voluntary dismissal terminated the trial court’s ‘case’ jurisdiction. ‘Case’ jurisdiction is the power of the court over a particular case that is within its subject matter jurisdiction. If MCR had objected below to CMG’s filing a motion to enforce settlement, it could have prevented the trial court from exercising any further ‘jurisdiction’ in the dismissed case and could have required CMG to litigate the breach of the settlement agreement in a new lawsuit.
Id. at 35 (internal citations omitted). It is clear that a trial court does not have jurisdiction over an out-of-court settlement agreement. Id.
This language in MCR Funding suggesting that “but for” the objection, jurisdiction would have been proper implicitly suggests that if both parties agree to hear the motion, the court would have “case” jurisdiction. But this is dead wrong. Everyone should know the parties cannot by agreement confer subject matter jurisdiction upon the court. Brautigam v MacVicar, 73 So. 2d 863, 866 (Fla. 1954).
The above-referenced jurisdictional limitation makes sense. If one side is seeking to enforce an instrument by motion, how does the adverse party defend the claim that a contract exists? How does one plead factually in opposition to a motion to enforce a contract? How does one raise contract defenses? One cannot. Motions are not pleadings. Pleadings and service of process give rise to personal jurisdiction and subject matter jurisdiction – not motions. Garcia v Stewart, 906 So. 2d 1117, 1122 (Fla. 4th DCA 2005) (jurisdiction must be lawfully invoked by the filing of a proper pleading). Often it is the insurance carrier’s (not the actual defendant’s) duty to pay. One cannot compel payment from a non-party carrier by motion.
The procedurally proper way to incorporate the new dispute into an existing lawsuit would be to file a motion to supplement the pleadings under Rule 1.190(d). But few lawyers know the rule of law from MCR Funding calls for invocation of supplemental pleadings. A motion to amend pleadings under Rule 1.190(a) is meant to address matters that occurred before suit was filed. A motion to file supplemental pleadings under Rule 1.190(d) is appropriate to raise matters arising after suit was filed. Absent an order permitting supplemental pleadings to be filed, and pursuant to Paulucci and MCR Funding, the movant must file a new lawsuit in order to litigate the breach of an alleged settlement agreement. If a purported settlement agreement is not filed or reviewed by the court, “the trial court lack[s] jurisdiction to enforce an out-of-court settlement[.]” Buonopane v. Ricci, 603 So. 2d 713, 714 (Fla. 4th DCA 1992) (after stipulating to dismissal of the tort claim the parties had a conflict over the terms of the settlement agreement which the court declined to hear because the terms had not been filed and incorporated into the judgment).
The Buonopane the Court held:
In essence, the parties settled a tort action by entering into a voluntary contractual arrangement. Like parties entering into other contracts, the parties here are free to assert their contractual rights in the event of a breach. However, since the parties did not choose to submit their agreement to the court to serve as a basis for a subsequent judgment or order, they have waived their right to have the tort action serve as a vehicle for enforcement of the agreement. … There is a substantial difference between an action for damages for breach of contract, and a motion to compel compliance with a court-sanctioned judgment or order.
Id. at 714. This is consistent with Paulucci and Boca Petroco, Inc. v. Petroleum Realty I, LLC, 993 So. 2d 1092, 1093 (Fla. 4th DCA 2008) (the court only retains jurisdiction over the enforcement of a settlement agreement when the trial court approves the agreement and affirmatively retains jurisdiction to enforce the agreement).
To further highlight the jurisdictional problem, one might also ask under what rule would the “Motion to Compel Enforcement” be brought? No ordinary rule of civil procedure contemplates a motion to enforce a contract arising from issues raised by the litigation. Some might point to Florida Rule of Civil Procedure 1.730(d) as a basis for an enforcement motion. But this rule must be harmonized with the above authorities holding a separate lawsuit (or supplemental pleadings) need be filed to enforce a settlement agreement. Subpart (c) of Rule 1.730 contemplates a motion to enforce can be harmonized with jurisdictional problem raised by MCR Funding if subpart (d) is read in conjunction with subpart (b) which contemplates filing a mediated settlement agreement with the court. Motions to enforce a mediated settlement agreement under Rule 1.730(d) are cognizable when those agreements are filed with the court and incorporated into an order or judgment resolving the case. When the settlement agreement is filed under Rule 1.730(b) and incorporated into an order or judgment, then a motion under subpart (d) is appropriate to enforce the agreement because the court has the inherent authority to enforce its own orders and judgments.
The language in Rule 1.730(b) relating to filed agreements is somewhat anachronistic and few appreciate the conflict between the literal language of Rule 1.730(d) contemplating a motion to enforce and the Paulucci/MCR Funding case-law which holds there is no jurisdiction to resolve a dispute over a an out-of-court settlement agreement.
Why does Rule 1.730 exist? At the time when drafters added mediation rules to the ordinary rules of civil procedure in the 1980’s to further the purposes of Florida’s Mediation Confidentiality and Privilege Act (Chapter 44.401, Fla. Stat.) it was not uncommon to file settlement agreements with the court or to read the terms of the settlement into the record before the judge, which explains the somewhat anachronistic language within Rules 1.730(b). When settlement agreements are filed, these rules may be invoked to enforce agreements consistent with Paulucci, MCR Funding, and Buonopane.
Terms sheets are useful at the end of a long day of mediation to memorialize a putative deal, but these short form “agreements” are in truth only “agreements to agree” and are unenforceable. They won’t support a motion to enforce. Mediators and parties may not want to acknowledge this reality but the rule from Paulucci and MCR Funding cases is as unambiguous as it is unassailable. The lesson is clear. If your Friday afternoon short form “mediation agreement” contemplates the execution of a second document that must be mutually agreed, your short form document is not enforceable. Until you have a longer mutually agreed and signed “release,” there is no completed agreement that may be enforced.
To cure this problem, the best practice is to bring a settlement template including all of the customary “boilerplate” and endeavor to hammer out the final settlement documents on the day of mediation. But is frequently impossible for a variety of reasons. When conducting mediation remotely by Zoom or other platform, short form agreements and confirmatory emails are common. However, when the parties leave mediation, it is the duty of the mediator under Rule 10.420(c) of the Florida Rules for Certified and Court-Appointed Mediators to ensure everyone understands whether they have a fully enforceable deal or merely an unenforceable term sheet[1] that contemplates something more be done to create a complete and enforceable agreement.
[1] See “If You Read Only One Thing About Mediation, Read This: The Critical Role of the ‘Henry Term Sheet Rule’ in Mediation.” https://henryadr.com/henry-term-sheet-rule/.