Remedies for Refusing to Consummate a Settlement Agreement Reached at Mediation

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Raising an allegation that a party has not participated in the mediation process in good faith has historically been a sensitive hot-button issue for mediators, parties, and even the courts. In fact, even on occasions where the charge is made and the question has been posed to a court, courts have generally been reluctant to find bad faith at a mediation unless there is some clear objective line that one of the parties crossed, such as a failure to appear, failure to have a party representative with knowledge or authority attend, or a failure to provide a mediation statement. Courts regularly make clear that while mediation may be mandatory, settling at a mediation is not. However, what if parties have reached some form of agreement at mediation, then refuse to move forward to consummate the same? Is that also bad faith? What will courts do in such a scenario?

At the outset, let’s consider the leading example of a court’s reluctance to find bad faith (or a lack of good faith) in In re A.T. Reynolds & Sons Inc.1 In that case, the mediator “submitted a report to the bankruptcy court detailing the allegations of bad faith,” including 11 specific allegations concerning one of the parties. Those allegations included certain actions of the party: (1) objecting to the topics to be covered in mediation; (2) demanding to know the identities of who would attend the mediation; (3) suggesting the mediation would be a waste of everybody’s time; (4) sending a junior representative and junior counsel; (5) attending mediation without an open mind or willingness to compromise; (6) being unwilling to listen at mediation; (7) threatening to never use the mediator’s services again if he reported any bad faith, and (8) refusing to make a settlement offer until after a bad-faith hearing in court.

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