Willingboro Mall, Ltd. v. 240/242 Franklin Avenue, L.L.C. (069082)

SYLLABUS
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the
convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the
interest of brevity, portions of any opinion may not have been summarized.)
Willingboro Mall, LTD. v. 240/242 Franklin Avenue, L.L.C. (A-62-11) (069082)
Argued February 27, 2013 -- Decided August 15, 2013
ALBIN, J., writing for a unanimous Court.
The issues in this appeal are (1) whether Rule 1:40-4(i) requires a settlement agreement reached at
mediation to be reduced to writing and signed at the time of mediation, and (2) whether plaintiff waived the
privilege that protects from disclosure any communication made during the course of mediation.
In February 2005, Willingboro Mall, LTD. (Willingboro), the owner of the Willingboro Mall, sold the
property to 240/242 Franklin Avenue, L.L.C. (Franklin). Willingboro subsequently filed a mortgage foreclosure
action on the mall property and the Honorable Ronald E. Bookbinder, J.S.C., directed the parties to participate in
non-binding mediation. The mediation was conducted on November 6, 2007, in the offices of Franklin’s attorney.
Willingboro’s manager, Scott Plapinger, and attorney, Michael Z. Zindler, Esq., appeared on behalf of the company.
Franklin offered $100,000 to Willingboro in exchange for settlement of all claims and for a discharge of the
mortgage on the mall property. On behalf of Willingboro, Plapinger orally accepted the offer in the presence of the
mediator and affirmed that he gave his attorney authority to enter into the settlement. The terms of the settlement,
however, were not reduced to writing before the conclusion of the mediation session.
On November 9, 2007, Franklin forwarded to Judge Bookbinder and Willingboro a letter announcing that
the case had been “successfully settled” and setting forth the purported terms of the settlement. Franklin’s attorney
sent a separate letter to Willingboro stating that he held $100,000 in his attorney trust account to fund the settlement,
that Franklin had executed a release, and that the monies would be disbursed when Willingboro filed a stipulation of
dismissal in the foreclosure action and delivered a mortgage discharge on the mall property. Willingboro rejected
the settlement terms and refused to sign a release or to discharge the mortgage. Franklin filed a motion to enforce
the settlement agreement and attached certifications from its attorney and the mediator that revealed
communications made between the parties during the mediation. Willingboro did not move to dismiss the motion,
or strike the certifications, based on violations of the mediation-communication privilege. Instead, in opposition to
the motion to enforce, Willingboro requested an evidentiary hearing and the taking of discovery, and filed a
certification from its manager, Scott Plapinger. The trial court ordered the taking of discovery and scheduled a
hearing to determine whether an enforceable agreement had been reached during mediation.
The parties agreed that they were “waiv[ing] any issues of confidentiality with regard to the mediation
process” and agreed that the testimony elicited could be used for purposes of the motion to enforce the settlement
agreement only and not for purposes of the underlying foreclosure action. Despite the waiver, the mediator declined
to testify regarding the mediation in the absence of an order from Judge Bookbinder. Judge Bookbinder pointed out
to the parties’ attorneys that under Rule 1:40-4(d), “unless the participants in a mediation agree, no mediator may
disclose any mediation communication to anyone who was not a participant in the mediation.” Willingboro’s
attorney stated that the parties agreed to the disclosure. The parties then consented to the court order compelling the
mediator to testify. The mediator was deposed and divulged mediation communications.
After the close of discovery, the Honorable Michael J. Hogan, P.J.Ch., conducted a four-day evidentiary
hearing. On the second day of the hearing, Willingboro reversed course and moved for an order expunging “all
confidential communications” disclosed, arguing that mediation communications are privileged under the New
Jersey Uniform Mediation Act (Mediation Act) and Rule 1:40-4. Judge Hogan ruled that Willingboro had waived
the mediation-communication privilege and held that “a binding settlement agreement was reached as a result of
[the] court-directed mediation.” The judge found that “[e]ven though the [settlement] terms were not reduced to a
formal writing at the mediation session,” an agreement had been reached. The court granted Franklin’s motion to
enforce the settlement as memorialized in its November 9 letter.
The Appellate Division affirmed the trial court’s enforcement of the settlement agreement. The panel
found that Willingboro “waived the confidentiality normally afforded to” mediation sessions and therefore the trial
court properly proceeded to “determine whether the parties had reached a settlement.”
The Supreme Court granted Willingboro’s petition for certification. 209 N.J. 97 (2012).
HELD: Plaintiff expressly waived the mediation-communication privilege and disclosed privileged
communications. The oral settlement agreement reached by the parties is upheld. Going forward, however, a
settlement that is reached at mediation but not reduced to a signed written agreement will not be enforceable.
1. Public policy favors the settlement of disputes, and the court system encourages mediation as an important means
of achieving that end. Mediation is governed by Rule 1:40 to 1:40-12, the Mediation Act, N.J.S.A. 2A:23C-1 to -13,
and the rules of evidence, N.J.R.E. 519. The success of mediation as a means of encouraging parties to compromise
and settle their disputes depends on confidentiality. Confidentiality promotes candid and unrestrained discussion, a
necessary component of any mediation intended to lead to settlement. To this end, court and evidence rules and the
Mediation Act confer a privilege on mediation communications, ensuring that participants’ words will not be used
against them in a later proceeding. (pp. 15-17)
2. Rule 1:40-4(c) provides that a communication made during the course of mediation is privileged. N.J.S.A.
2A:23C-2 broadly defines a “[m]ediation communication” as any “statement, whether verbal or nonverbal or in a
record, that occurs during a mediation or is made for purposes of considering, conducting, participating in, initiating,
continuing, or reconvening a mediation or retaining a mediator.” The Mediation Act and the rules of evidence both,
in identical language, confer a privilege on mediation communications. The mediation-communication privilege,
however, is not absolute. Court and evidence rules and the Mediation Act carve out limited exceptions to the
privilege. The first is the signed-writing exception, which allows a settlement agreement reduced to writing and
properly adopted by the parties to be admitted into evidence to prove the validity of the agreement. The second
exception is waiver. A valid waiver requires not only that a party “have full knowledge of his legal rights,” but also
that the party “clearly, unequivocally, and decisively” surrender those rights. Knorr v. Smeal, 178 N.J. 169, 177
(2003). (pp. 17-21)
3. The signed–writing exception does not apply in this case because, early in the proceedings, Willingboro did not
seek to bar enforcement of the settlement based on the lack of a signed written agreement. The Mediation Act and
the evidence rules generally prohibit a mediator from making an “oral or written communication” to a court other
than to inform the court whether a settlement was reached. Here, the mediator went far beyond merely
communicating to the court that the parties had reached a settlement. By validating the contents of Franklin’s letter,
the mediator breached the privilege. Willingboro did not consent in advance to the disclosure of mediation
communications to the court. But despite Franklin’s violation of the mediation-communication privilege,
Willingboro did not timely move to strike or suppress the disclosures of the mediation communications. Instead,
Willingboro disclosed mediation communications and thereby itself breached the mediation-communication
privilege, completely opening the door. Although Franklin instituted the enforcement litigation and fired the first
shot that breached the privilege, Willingboro returned fire, further shredding the privilege. (pp. 22-28)
4. If the parties to mediation reach an agreement to resolve their dispute, the terms of that settlement must be
reduced to writing and signed before the mediation comes to a close. Going forward, a settlement that is reached at
mediation but not reduced to a signed written agreement will not be enforceable. The signed, written agreement
requirement will greatly minimize the potential for litigation. In addition, a party seeking the protection of a
privilege must timely invoke the privilege. A party that not only expressly waives the mediation-communication
privilege, but also discloses privileged communications, cannot later complain that it has lost the benefit of the
privilege it has breached. (pp. 28-30)
The judgment of the Appellate Division is AFFIRMED.
CHIEF JUSTICE RABNER; JUSTICES LaVECCHIA, HOENS, and PATTERSON; and JUDGE
RODRÍGUEZ (temporarily assigned) join in JUSTICE ALBIN’s opinion. JUDGE CUFF (temporarily
assigned) did not participate.
2
SUPREME COURT OF NEW JERSEY
A-62 September Term 2011
069082
WILLINGBORO MALL, LTD., a New
Jersey Limited Partnership,
Plaintiff-Appellant,
v.
240/242 FRANKLIN AVENUE,
L.L.C., a New York Limited
Liability Company; COLONIAL
COURT APARTMENTS, L.L.C., a
Delaware Limited Liability
Company; FESTIVAL MARKET AT
WILLINGBORO, L.L.C., a New
Jersey Limited Liability
Company; ROY LUDWICK; and
NAMIK MARKE,
Defendants-Respondents.
Argued February 27, 2013 – Decided August 15, 2013
On certification to the Superior Court,
Appellate Division, whose opinion is
reported at 421 N.J. Super. 445 (2011).
Glenn A. Weiner argued the cause for
appellant (Klehr Harrison Harvey Branzburg,
attorneys; Mr. Weiner and Michael A.
Iaconelli, of counsel and on the briefs).
Joseph P. Grimes argued the cause for
respondents (Grimes & Grimes attorneys).
JUSTICE ALBIN delivered the opinion of the Court.
One of the main purposes of mediation is the expeditious
resolution of disputes. Mediation will not always be
successful, but it should not spawn more litigation. In this
case, the parties engaged in protracted litigation over whether
they had reached an oral settlement agreement in mediation.
Instead of litigating the dispute that was sent to mediation,
the mediation became the dispute.
Communications made during the course of a mediation are
generally privileged and therefore inadmissible in another
proceeding. A signed written settlement agreement is one
exception to the privilege. Another exception is an express
waiver of the mediation-communication privilege by the parties.
Here, defendant moved to enforce the oral settlement
agreement and, in doing so, submitted certifications by its
attorney and the mediator disclosing privileged communications.
Instead of seeking to bar the admission of privileged mediation
communications, plaintiff, in opposing the motion, litigated the
validity of the oral agreement. In pursuing that course,
plaintiff also disclosed mediation communications. In
particular, plaintiff expressly waived the privilege on the
record when questioning the mediator at a deposition and at an
evidentiary hearing.
The Chancery Division found that plaintiff had waived the
privilege and upheld the parties’ oral agreement at the
mediation session. The Appellate Division upheld the oral
agreement. We affirm the judgment of the Appellate Division.
2
To be clear, going forward, parties that intend to enforce
a settlement reached at mediation must execute a signed written
agreement. Had that simple step been taken, the collateral
litigation in this case might have been avoided. In responding
to the motion to enforce, plaintiff did not timely interpose the
lack of a signed written agreement as a defense. Moreover, if
plaintiff intended to defend based on the absence of a written
agreement, it was obliged not to litigate the validity of the
oral agreement by waiving the mediation-communication privilege.
This case should also serve as a reminder that a party seeking
to benefit from the mediation-communication privilege must
timely assert it.
I.
A.
This case begins with a commercial dispute over the terms
of the sale of the Willingboro Mall in Willingboro Township. In
February 2005, Willingboro Mall, LTD. (Willingboro), the owner
of the Willingboro Mall, sold the property to 240/242 Franklin
Avenue, L.L.C. (Franklin). The specific terms of the contract
for sale are not germane to this appeal. To secure part of
Franklin’s obligation, the parties executed a promissory note
and mortgage on the property. Willingboro claimed that monies
due on August 3, 2005, were not forthcoming and filed a
3
mortgage-foreclosure action on the mall property. Franklin
denied that it had defaulted on its contractual obligations and
sought dismissal of the complaint. The Honorable Ronald E.
Bookbinder, J.S.C., directed the parties to participate in a
non-binding mediation for potential resolution of the dispute.
B.
On November 6, 2007, a retired Superior Court judge
conducted the mediation over the course of several hours in the
offices of Franklin’s attorney, Joseph P. Grimes, Esq.1
Willingboro’s manager, Scott Plapinger, and attorney, Michael Z.
Zindler, Esq., appeared on behalf of the company. The mediator
met privately with each side, conveying offers and
counteroffers. At some point, Franklin offered $100,000 to
Willingboro in exchange for settlement of all claims and for a
discharge of the mortgage on the mall property. On behalf of
Willingboro, Plapinger orally accepted the offer in the presence
of the mediator, who reviewed with the parties the terms of the
proposed settlement. Plapinger also affirmed that he gave his
attorney authority to enter into the settlement. The terms of
the settlement, however, were not reduced to writing before the
conclusion of the mediation session.
1
This statement of facts was primarily adduced at an evidentiary
hearing on a motion to enforce an alleged oral settlement
agreement between the parties.
4
Three days later, on November 9, Franklin forwarded to
Judge Bookbinder and Willingboro a letter announcing that the
case had been “successfully settled.” The letter set forth the
purported terms of the settlement in eight numbered paragraphs.
On November 20, Franklin’s attorney sent a separate letter to
Willingboro stating that he held $100,000 in his attorney trust
account to fund the settlement, that Franklin had executed a
release, and that the monies would be disbursed when Willingboro
filed a stipulation of dismissal in the foreclosure action and
delivered a mortgage discharge on the mall property.
On November 30, 2007, Willingboro’s attorney told
Franklin’s attorney that Willingboro rejected the settlement
terms and refused to sign a release or to discharge the
mortgage. In December, Franklin filed a motion to enforce the
settlement agreement. In support of the motion, Franklin
attached certifications from its attorney and the mediator that
revealed communications made between the parties during the
mediation. Among other things, the mediator averred in his
certification that the parties voluntarily “entered into a
binding settlement agreement with full knowledge of its terms,
without any mistake or surprise and without any threat or
coercion” and that the settlement terms were accurately
memorialized in Franklin’s letter to the court.
5
Willingboro did not give its consent to the filing of
either certification. However, Willingboro did not move to
dismiss the motion, or strike the certifications, based on
violations of the mediation-communication privilege. Instead,
in opposition to the motion to enforce, Willingboro requested an
evidentiary hearing and the taking of discovery, and filed a
certification from its manager, Scott Plapinger.
In his certification, Plapinger averred that he had
reluctantly agreed to participate in a mediation that his
attorney told him would be non-binding. Plapinger also
certified to the substance of the parties’ discussions during
the mediation. He asserted that as a result of his attorney’s
relentless insistence he went into a room where the mediator
summarized the settlement terms agreed upon by the parties.
Plapinger stated that the “purported terms of a final and
binding settlement” had not been reduced to writing and that if
it had, he would not have signed it. According to Plapinger,
after the mediation, his attorney told him that the agreement
was “binding” and that he had to sign the settlement papers. He
refused to do so.
The trial court ordered the taking of discovery and
scheduled a hearing to determine whether an enforceable
agreement had been reached during mediation.
C.
6
The parties deposed five witnesses, including the mediator,
Willingboro’s manager, and Willingboro’s attorney. Before
deposing the mediator, the parties agreed that they were
“waiv[ing] any issues of confidentiality with regard to the
mediation process” and agreed that the testimony elicited could
be used for purposes of the motion to enforce the settlement
agreement only and not for purposes of the underlying
foreclosure action. Despite the waiver, the mediator declined
to testify regarding the mediation in the absence of an order
from Judge Bookbinder.
After a recess, Judge Bookbinder entered the room where the
deposition was being taken. Judge Bookbinder pointed out to the
parties’ attorneys that under Rule 1:40-4(d), “unless the
participants in a mediation agree, no mediator may disclose any
mediation communication to anyone who was not a participant in
the mediation.” Willingboro’s attorney stated that the parties
agreed to the disclosure. The parties then consented to the
court order compelling the mediator to testify. The mediator
was deposed and divulged mediation communications.
D.
After the close of discovery, the Honorable Michael J.
Hogan, P.J.Ch., conducted a four-day evidentiary hearing.
Franklin called the mediator as its first witness. The mediator
gave detailed testimony concerning communications made between
7
the parties during the course of the mediation. The mediator
testified that at the conclusion of the mediation, after a
settlement had been reached, he asked Plapinger whether he had
authorized his attorney to accept the $100,000 settlement offer,
and Plapinger answered, “yes.” Moreover, Plapinger -- who was
standing next to his attorney -- acknowledged that the
settlement ended the case.
On cross-examination by Willingboro’s new attorney, Michael
Iaconelli, Esq., the mediator balked at disclosing “confidential
type information . . . conversations [he] had with Mr. Zindler
and [Mr. Plapinger].” Iaconelli responded, “it’s our position
that the parties have waived confidentiality on that issue.”
Franklin’s attorney agreed that “Judge Bookbinder’s order is
broad enough to waive confidentiality with regard to the
mediation.” Finally, to satisfy the mediator’s concerns,
Iaconelli requested that the court issue “a standing order”
requiring answers to questions that “concern discussions between
[the mediator] and Mr. Zindler and [Mr. Plapinger] . . . because
we are waiving, as we’ve already done, based on the agreement of
the parties and Judge Bookbinder’s order, any confidentiality on
that issue.” Willingboro’s attorney then continued to question
the mediator concerning communications made during the
mediation.
8
On the second day of the hearing, Willingboro reversed
course and moved for an order expunging “all confidential
communications” disclosed, including those in the mediator’s
testimony and certification and Franklin’s attorney’s
certification, and barring any further mediation-communication
disclosures. Willingboro maintained that mediation
communications are privileged under the New Jersey Uniform
Mediation Act (Mediation Act or Act) and Rule 1:40-4.
Willingboro argued that mediation communications could not be
presented in support of the motion to enforce the settlement.
Judge Hogan -- after reviewing the record in detail --
ruled that Willingboro had waived the mediation-communication
privilege, and the hearing proceeded with the cross-examination
of the mediator.
Franklin next called as a witness Michael Zindler,
Willingboro’s attorney at the mediation. Zindler testified
that, on behalf of Willingboro, manager Scott Plapinger agreed
to a settlement at the mediation, and that the terms included a
payment of $100,000 by Franklin in exchange for a release and a
discharge of the mortgage by Willingboro. He also stated that
Franklin’s November 9, 2007, letter accurately memorialized the
terms of the settlement agreement.
Willingboro called Plapinger to the stand. Plapinger
testified that his attorney and the mediator pressured him into
9
agreeing to a settlement that he believed would be non-binding.
He acknowledged that the mediator read the terms of the proposed
settlement to him and that he “just . . . acquiesced and agreed
to everything that was asked of [him].” According to Plapinger,
“I said whatever I needed to say to extricate myself from an
incredible uncomfortable, high pressure situation.” Apparently
not given to understatement, he also said, “I would have
confessed to the Lindbergh kidnapping and the Kennedy
assassination . . . . I said yes to all of it.”
Bruce Plapinger, Scott’s cousin and a member of
Willingboro’s board of managers, testified to a telephone
conversation he had with Scott during the mediation. Bruce
asserted that he did not believe -- based on his conversations
with Scott -- that the mediation proceeding would lead to a
binding result.2
II.
Judge Hogan held that “a binding settlement agreement was
reached as a result of [the] court-directed mediation.” He
credited the testimony of the mediator and Willingboro’s former
attorney, Michael Zindler, and discounted the testimony of Scott
2
Also admitted into evidence was a videotaped deposition of Alan
Braverman, a business acquaintance of the parties, who testified
to an earlier attempt to settle the dispute. The court found
his testimony to be “essentially irrelevant.”
10
Plapinger, who -- Judge Hogan believed -- was suffering from
“buyer’s remorse.” Judge Hogan found that “[e]ven though the
[settlement] terms were not reduced to a formal writing at the
mediation session,” an agreement had been reached, as confirmed
by the mediator and Zindler. Judge Hogan noted that Zindler
testified that Franklin’s November 9 letter had accurately set
forth the parties’ agreement. Last, the court determined that
the validity of the settlement agreement rested on Plapinger’s
verbal assent to the agreement in the presence of others, not on
any unexpressed mental reservations he may have had. Thus, the
court granted Franklin’s motion to enforce the settlement as
memorialized in its November 9 letter.
III.
The Appellate Division affirmed the trial court’s
enforcement of the settlement agreement.3 Willingboro Mall, Ltd.
v. 240/242 Franklin Ave., L.L.C., 421 N.J. Super. 445, 456 (App.
Div. 2011). The appellate panel acknowledged that parties
assigned to mediation may waive the privilege that protects from
disclosure any communication made during the course of the
mediation, citing N.J.S.A. 2A:23C-5 and Rule 1:40-4(d). Id. at
452. The panel found that Willingboro “waived the
3
We do not address other issues raised before the trial court
and Appellate Division, which are not germane to this appeal.
11
confidentiality normally afforded to” mediation sessions and
therefore the trial court properly proceeded to “determine
whether the parties had reached a settlement.” Id. at 455.
Additionally, the panel rejected Willingboro’s argument that the
mediation rule, R. 1:40-4(i), “require[d] contemporaneous
reduction of the terms to writing and obtaining signatures on
the document at the mediation.” Id. at 453. Finally, the panel
held that there was substantial credible evidence in the record
to support the court’s findings “that the parties had reached a
settlement at the mediation, the terms of the agreement were as
set forth in the November 9, 2007 letter prepared by defendants’
attorney to Zindler and the court, and that Scott Plapinger’s
assent to the settlement was not the product of coercion.” Id.
at 455-56.
This Court granted Willingboro’s petition for
certification. Willingboro Mall, Ltd. v. 240/242 Franklin Ave.,
L.L.C., 209 N.J. 97 (2012). Willingboro raises two issues in
its petition: whether Rule 1:40-4(i) requires a settlement
agreement reached at mediation to be reduced to writing and
signed at the time of mediation, and whether Willingboro waived
the mediation-communication privilege.
IV.
12
Willingboro urges this Court to hold that, under Rule 1:40-
4(i), “a settlement reached at mediation [is not] enforceable”
unless it is “reduced to writing at the time of the mediation
and signed by the parties.” Because the writing memorializing
the terms of the settlement was forwarded by Franklin after the
mediation and never signed or otherwise assented to by
Willingboro, Willingboro argues that both the trial court and
Appellate Division erred in enforcing the oral agreement.
Moreover, Willingboro disputes the trial court’s and Appellate
Division’s findings that it waived the mediation-communication
privilege. Willingboro submits that it did not waive the
mediation-communication privilege “by presenting evidence in
opposition” to the motion to enforce the oral agreement.
Willingboro takes the position that it could not have waived the
mediation-communication privilege, which “already had been
destroyed by [Franklin’s] disclosures” to the court through the
mediator’s certification. Willingboro posits that its response
to Franklin’s breach of the mediation-communication privilege
was defensive and should not be taken as a waiver of the
privilege.
In contrast, Franklin maintains that nothing in Rule 1:40-
4(i) requires that a written settlement agreement resulting from
mediation “be created or tendered on the actual day of the
mediation” or that it be signed by the parties. Franklin argues
13
that the Appellate Division correctly “determined that the three
day gap between mediation and memorialization of the settlement
was reasonable.” Moreover, Franklin relies on the reasoning and
holdings of the trial court and Appellate Division that
Willingboro waived the mediation-communication privilege. It
therefore requests that this Court uphold enforcement of the
oral settlement agreement reached at mediation between the
parties.
V.
In construing the meaning of a court rule or a statute, our
review is de novo, and therefore we owe no deference to the
trial court’s or Appellate Division’s legal conclusions. Murray
v. Plainfield Rescue Squad, 210 N.J. 581, 584 (2012) (citations
omitted); see also Manalapan Realty, L.P. v. Twp. Comm., 140
N.J. 366, 378 (1995) (citations omitted) (“A trial court’s
interpretation of the law and the legal consequences that flow
from established facts are not entitled to any special
deference.”). On the other hand, we will defer to a trial
court’s factual findings, particularly those influenced by the
court’s opportunity to assess witness testimony firsthand,
provided the findings are supported by “sufficient credible
evidence in the record.” Brunson v. Affinity Fed. Credit Union,
199 N.J. 381, 397 (2009) (internal quotation marks and citation
14
omitted); see also Cesare v. Cesare, 154 N.J. 394, 412 (1998)
(citation omitted).
VI.
A.
Public policy favors the settlement of disputes.
Settlement spares the parties the risk of an adverse outcome and
the time and expense -- both monetary and emotional -- of
protracted litigation. See State v. Williams, 184 N.J. 432, 441
(2005). Settlement also preserves precious and overstretched
judicial resources. See Herrera v. Twp. of S. Orange Vill., 270
N.J. Super. 417, 424 (App. Div. 1993) (“There is a clear public
policy in this state favoring settlement of litigation.”
(citation omitted)), certif. denied, 136 N.J. 28 (1994).
Our court system encourages mediation as an important means
of settling disputes. See Williams, supra, 184 N.J. at 446(citations omitted). Indeed, our court rules provide for
Complementary Dispute Resolution Programs, which are intended to
enhance the “quality and efficacy” of the judicial process. R.
1:40-1. In particular, Rule 1:40-4(a) authorizes, in certain
cases, a Superior Court judge to “require the parties to attend
a mediation session at any time following the filing of a
complaint.”
15
Mediation is governed by our court rules, R. 1:40 to 1:40-
12, the Mediation Act, N.J.S.A. 2A:23C-1 to -13, and our rules
of evidence, N.J.R.E. 519. The success of mediation as a means
of encouraging parties to compromise and settle their disputes
depends on confidentiality -- a point recognized in both our
jurisprudence and our court rules. See Williams, supra, 184
N.J. at 446-47; R. 1:40-4(d).
Rule 1:40-4(d) provides: “Unless the participants in a
mediation agree otherwise or to the extent disclosure is
permitted by this rule, no party, mediator, or other participant
in a mediation may disclose any mediation communication to
anyone who was not a participant in the mediation.” The rule
recognizes that without assurances of confidentiality,
“‘disputants may be unwilling to reveal relevant information and
may be hesitant to disclose potential accommodations that might
appear to compromise the positions they have taken.’” Williams,
supra, 184 N.J. at 447 (quoting Final Report of the Supreme
Court Task Force on Dispute Resolution 23 (1990)).
Confidentiality promotes candid and unrestrained discussion, a
necessary component of any mediation intended to lead to
settlement. Id. at 446-47 (citations omitted). To this end,
our court and evidence rules and the Mediation Act confer a
privilege on mediation communications, ensuring that
16
participants’ words will not be used against them in a later
proceeding.
B.
Rule 1:40-4(c) provides that a communication made during
the course of mediation is privileged:
A mediation communication is not subject to
discovery or admissible in evidence in any
subsequent proceeding except as provided by
the New Jersey Uniform Mediation Act,
N.J.S.A. 2A:23C-1 to -13. A party may,
however, establish the substance of the
mediation communication in any such
proceeding by independent evidence.
Although our court rule does not define “mediation
communication,” the Mediation Act does. N.J.S.A. 2A:23C-2
broadly defines a “[m]ediation communication” as any “statement,
whether verbal or nonverbal or in a record, that occurs during a
mediation or is made for purposes of considering, conducting,
participating in, initiating, continuing, or reconvening a
mediation or retaining a mediator.”
The Mediation Act and our rules of evidence both, in
identical language, confer a privilege on mediation
communications. N.J.S.A. 2A:23C-4(a) and N.J.R.E. 519(a)(a)
provide: “Except as otherwise provided . . . a mediation
communication is privileged . . . and shall not be subject to
discovery or admissible in evidence in a proceeding unless
waived or precluded as provided by . . . [N.J.S.A. 2A:23C-5].”
17
(Emphasis added). N.J.S.A. 2A:23C-4(b) and N.J.R.E. 519(a)(b)
specifically set forth the breadth of the privilege:
b. In a proceeding, the following privileges
shall apply:
(1) a mediation party may refuse to
disclose, and may prevent any other
person from disclosing, a mediation
communication.
(2) a mediator may refuse to disclose a
mediation communication, and may
prevent any other person from
disclosing a mediation communication of
the mediator.
. . . .
Additional support for the broad scope of the privilege is
found in the drafters’ commentary to the model Uniform Mediation
Act. The drafters explained that the mediation-communication
privilege allows a participant “to refuse to disclose and to
prevent another from disclosing particular communications.”
Nat’l Conference of Comm’rs on Unif. State Laws, Uniform
Mediation Act § 4, comment 4 (2003) (emphasis added)
[hereinafter UMA Drafters’ Comments], available at
http://www.uniformlaws.org/shared/docs/mediation/uma_final_03.pd
f. The drafters understood that the ability to block another
from disclosing mediation communications “is critical to the
operation of the privilege” and that the “parties have the
greatest blocking power.” Ibid.
C.
18
The mediation-communication privilege is not absolute. Our
court and evidence rules and the Mediation Act carve out limited
exceptions to the privilege, two of which are pertinent to this
case. The first is the signed-writing exception, which allows a
settlement agreement reduced to writing and properly adopted by
the parties to be admitted into evidence to prove the validity
of the agreement.
Rule 1:40-4(i) specifies the manner in which settlement
agreements are to be memorialized “[i]f the mediation results in
the parties’ total or partial agreement.” It provides that the
agreement “shall be reduced to writing and a copy thereof
furnished to each party.” Ibid. Rule 1:40-4(i) also provides
that “[t]he agreement need not be filed with the court, but if
formal proceedings have been stayed pending mediation, the
mediator shall report to the court whether agreement has been
reached.” Although Rule 1:40-4(i) does not state specifically
that a written agreement must be signed by the parties, a
publication prepared by the Civil Practice Division makes clear
that any settlement agreement should be reduced to writing and
signed. Civil Practice Div., Mediator’s Tool Box: A Case
Management Guide for Presumptive Roster Mediators 11 (Nov.
2011), available at
http://www.judiciary.state.nj.us/civil/mediators_toolbox.pdf
(“Before the parties leave the mediation, the mediator should
19
insist that a short form settlement agreement (term sheet) be
drafted by one of the attorneys and signed by the parties at the
mediation table.”).
Although our court rule may be silent about whether a
signed agreement is necessary, the Mediation Act and our
evidence rules are not. N.J.S.A. 2A:23C-6(a)(1) and N.J.R.E.
519(c)(a)(1) both provide that “an agreement evidenced by a
record signed by all parties to the agreement” is an exception
to the mediation-communication privilege. (Emphasis added).
Because a signed agreement is not privileged, it therefore is
admissible to prove and enforce a settlement.
Although neither the Mediation Act nor N.J.R.E. 519
specifies what constitutes an “agreement evidenced by a record”
and “signed,” the UMA Drafters’ Comments give insight regarding
the intended scope of those words. The UMA Drafters’ Comments
report that those words apply not only to “written and executed
agreements,” but also to “those recorded by tape . . . and
ascribed to by the parties on the tape.” UMA Drafters’
Comments, supra, at § 6(a)(1), comment 2. For example, “a
participant’s notes about an oral agreement would not be a
signed agreement.” Ibid. In contrast, a “signed agreement”
would include “a handwritten agreement that the parties have
signed, an e-mail exchange between the parties in which they
20
agree to particular provisions, and a tape recording in which
they state what constitutes their agreement.” Ibid.
D.
The second exception to the mediation-communication
privilege relevant to this case is waiver. The privilege
may be waived in a record or orally during a
proceeding if it is expressly waived by all
parties to the mediation and:
(1) in the case of the privilege of a
mediator, it is expressly waived by the
mediator; and
(2) in the case of the privilege of a
nonparty participant, it is expressly
waived by the nonparty participant.
[N.J.S.A. 2A:23C-5(a); N.J.R.E. 519(b).]
“Waiver is the voluntary and intentional relinquishment of
a known right.” Knorr v. Smeal, 178 N.J. 169, 177 (2003)
(citation omitted). A valid waiver requires not only that a
party “have full knowledge of his legal rights,” but also that
the party “clearly, unequivocally, and decisively” surrender
those rights. Ibid. Importantly, N.J.S.A. 2A:23C-5(a) and
N.J.R.E. 519(b) mandate that the waiver be express. The UMA
Drafters’ Comments explain that “[t]he rationale for requiring
explicit waiver is to safeguard against the possibility of
inadvertent waiver.” UMA Drafters’ Comments, supra, at § 5(a)-
(b), comment 1. Moreover, waivers “conducted on the record” do
not present the problem of proving “what was said.” Ibid.
21
VII.
A.
We now apply these principles of law to the facts before
us. First, had the parties reduced to writing the terms of the
agreement and affixed their signatures to the document at the
conclusion of the mediation, Franklin would have been able to
seek enforcement of the settlement with evidence that fell
within an exception to the mediation-communication privilege.
N.J.S.A. 2A:23C-6(a)(1); N.J.R.E. 519 (noting that “an agreement
evidenced by a record signed by all parties to the agreement” is
an exception to the mediation-communication privilege). But
here, the signed-writing exception does not come into play
because, early in the proceedings, Willingboro did not seek to
bar enforcement of the settlement based on the lack of a signed
written agreement. Moreover, if Willingboro intended to rely on
the signed-writing doctrine, then it was obliged to stand by
this rule and not litigate the oral agreement by waiving the
mediation-communication privilege.
Second, we conclude that the certifications filed by
Franklin’s attorney and the mediator in support of Franklin’s
motion to enforce the oral agreement disclosed privileged
mediation communications. The certifications refer to
statements made during the mediation and therefore fall squarely
22
within the definition of a “mediation communication” contained
in N.J.S.A. 2A:23C-2.
Moreover, the Mediation Act and our evidence rules
generally prohibit a mediator from making an “oral or written
communication” to a court other than to inform the court whether
a settlement was reached. N.J.S.A. 2A:23C-7(a)-(b); N.J.R.E.
519(d). Here, the mediator went far beyond merely communicating
to the court that the parties had reached a settlement. The
mediator certified to the accuracy of Franklin’s November 9
letter, which set forth in eight numbered paragraphs the terms
of an oral agreement between the parties. Franklin’s letter
revealed mediation communications -- not only Willingboro’s oral
assent to the settlement, but also its specific agreement to
individual terms. By validating the contents of Franklin’s
letter, the mediator breached the privilege.
The terms of the settlement rested on privileged
communications between the parties and mediator. However,
Willingboro did not consent in advance to the disclosure of
mediation communications to the court.
In the absence of a signed settlement agreement or waiver,
it is difficult to imagine any scenario in which a party would
be able to prove a settlement was reached during the mediation
without running afoul of the mediation-communication privilege.
The United States Court of Appeals for the Third Circuit reached
23
a similar conclusion under its Local Appellate Rule (LAR) 33.5.
Beazer East, Inc. v. Mead Corp., 412 F.3d 429, 434-36 (3d Cir.
2005) (citing 3d Cir. L.A.R. 33.5 (1995)), cert. denied, 546
U.S. 1091, 126 S. Ct. 1040, 163 L. Ed. 2d 857 (2006).
In Beazer, the plaintiff attempted to enforce an alleged
oral agreement made by the parties during an appellate
mediation. Id. at 434. Like the mediation-communication
privilege in N.J.S.A. 2A:23C-4 and N.J.R.E. 519(a), LAR 33.5(c)
provides that no one participating in the mediation session “may
disclose ‘statements made or information developed during the
mediation process.’” Beazer, supra, 412 F.3d at 434-35 (quoting
3d Cir. L.A.R. 33.5(c) (1995)). LAR 33.5(d) “further provides
that ‘if a settlement is reached, the agreement shall be reduced
to writing and shall be binding upon all parties to the
agreement.’” Id. at 435 (quoting 3d Cir. L.A.R. 33.5(d)
(1995)). The Third Circuit concluded that allowing oral
agreements reached at mediation to bind the parties “would
seriously undermine the efficacy of the Appellate Mediation
Program by compromising the confidentiality of settlement
negotiations.” Id. at 434. The policy reasons supporting this
approach are the encouragement of uninhibited discussion and the
avoidance of contested hearings to determine whether the parties
reached a settlement. See id. at 435-36 (citation omitted).
Ultimately, the plaintiff in Beazer could not “prove the
24
existence or terms of the disputed oral settlement without
violating this provision’s broadly stated [mediation-
communication-disclosure] prohibitions.” Id. at 435.
Third, without the use of communications made during the
mediation, Franklin likely could not have proved the existence
of a settlement. Despite Franklin’s violation of the mediation-
communication privilege in seeking to enforce the oral
settlement agreement reached at mediation, Willingboro did not
timely move to strike or suppress the disclosures of the
mediation communications. Instead, Willingboro proceeded to
litigate whether it had, in fact, entered into a binding, oral
settlement agreement. In taking this tack, Willingboro followed
Franklin’s approach and disclosed mediation communications.
Willingboro breached the mediation-communication privilege by
appending to its opposition papers Scott Plapinger’s
certification, which revealed the substance of mediation
communications. Additionally, Willingboro then engaged in the
discovery process, deposing the mediator and participating in
four other depositions that trenched on the mediation-
communication privilege.
We reject Willingboro’s assertion that its own disclosures
of mediation communications were permitted by N.J.S.A. 2A:23C-
5(b) and N.J.R.E. 519(b)(b). That statute and its corollary
evidence rule provide: “A person who discloses . . . a
25
mediation communication that prejudices another person in a
proceeding is precluded from asserting a privilege under
[N.J.S.A. 2A:23C-4], but only to the extent necessary for the
person prejudiced to respond to the representation or
disclosure.” This language suggests that the disclosure of some
privileged communications does not necessarily open the door to
disclosure of all privileged communications.
However, in this case, Willingboro expressly waived the
mediation-communication privilege in responding to the motion to
enforce the oral settlement agreement. In defending against
Franklin’s violation of the privilege, Willingboro did not have
to make further disclosures of mediation communications. It
merely had to invoke the protections of the Mediation Act and
our evidence rules, which provide that “a mediation party may .
. . prevent any other person from disclosing [] a mediation
communication.” N.J.S.A. 2A:23C-4(b)(1); N.J.R.E.
519(a)(b)(1). Instead, Willingboro engaged in unrestricted
litigation over the validity of the oral agreement, which
involved its own wholesale disclosures of mediation
communications. Willingboro completely opened the door; it
cannot now find shelter in N.J.S.A. 2A:23C-5(b) and N.J.R.E.
519.
B.
26
The mediation-communication privilege “may be waived in a
record or orally during a proceeding if it is expressly waived
by all parties to the mediation.” N.J.S.A. 2A:23C-5(a);
N.J.R.E. 519(b)(a). Although Franklin instituted the
enforcement litigation and fired the first shot that breached
the privilege, Willingboro returned fire, further shredding the
privilege. At the mediator’s deposition, Willingboro agreed to
“waive any issues of confidentiality with regard to the
mediation process.” When the mediator declined to testify in
the absence of a court order, Willingboro gave its unequivocal
consent to having Judge Bookbinder direct the mediator to
respond to questions that touched on communications made during
the mediation.
When the mediator testified on the first day of the hearing
concerning Franklin’s motion to enforce the oral settlement
agreement, Willingboro’s attorney insisted that the mediator
respond to questions that the mediator believed would elicit
“confidential type information.” Franklin’s attorney told the
court that “Judge Bookbinder’s order is broad enough to waive
confidentiality with regard to the mediation.” Willingboro’s
attorney was evidently in total agreement on this issue.
Indeed, Willingboro’s attorney asked the court to order the
mediator to answer questions about mediation discussions between
the mediator and Willingboro’s representatives, attorney Zindler
27
and company manager Plapinger. Willingboro’s attorney also
stated that his client had waived the issue of confidentiality.
Only after filing a certification in opposition to
enforcement of the oral agreement, participating in five
discovery depositions, and one day of an evidentiary hearing --
and after myriad breaches of the mediation-communication
privilege -- did Willingboro attempt to invoke the privilege on
the second hearing date. However, by then, Willingboro had
passed the point of no return. Willingboro had expressly waived
the privilege, N.J.S.A. 2A:23C-5(a) and N.J.R.E. 519(b)(a) -- it
had “clearly, unequivocally, and decisively” surrendered its
right to object to the admission of evidence regarding mediation
communications at the evidentiary hearing. Knorr, supra, 178
N.J. at 177 (citing Country Chevrolet, Inc. v. Twp. of N.
Brunswick Planning Bd., 190 N.J. Super. 376, 380 (App. Div.
1983)). Willingboro intentionally elected not to invoke the
privilege in a timely manner.
VIII.
In summary, if the parties to mediation reach an agreement
to resolve their dispute, the terms of that settlement must be
reduced to writing and signed by the parties before the
mediation comes to a close. In those cases in which the
complexity of the settlement terms cannot be drafted by the time
28
the mediation session was expected to have ended, the mediation
session should be continued for a brief but reasonable period of
time to allow for the signing of the settlement. We also see no
reason why an audio- or video-recorded agreement would not meet
the test of “an agreement evidenced by a record signed by all
parties to the agreement” under N.J.S.A. 2A:23C-6(a)(1) and
N.J.R.E. 519(c)(a)(1). See UMA Drafters’ Comments, supra, at §
6, comment 2. To be clear, going forward, a settlement that is
reached at mediation but not reduced to a signed written
agreement will not be enforceable.
The mediation-communication privilege is intended to
encourage candid and uninhibited settlement discussions. The
rule requiring a signed, written agreement is intended to
ensure, to the extent humanly possible, that the parties have
voluntarily and knowingly entered into the settlement and to
protect the settlement against a later collateral attack. A
settlement in mediation should not be the prelude to a new round
of litigation over whether the parties reached a settlement.
The signed, written agreement requirement -- we expect -- will
greatly minimize the potential for litigation.
Last, this case serves as a reminder that a party seeking
the protection of a privilege must timely invoke the privilege.
A party that not only expressly waives the mediation-
communication privilege, but also discloses privileged
29
communications, cannot later complain that it has lost the
benefit of the privilege it has breached.
IX.
For the reasons expressed, we affirm the judgment of the
Appellate Division, which upheld the Chancery Division’s
confirmation of the oral settlement agreement in this case.
CHIEF JUSTICE RABNER; JUSTICES LaVECCHIA, HOENS, and
PATTERSON; and JUDGE RODRÍGUEZ (temporarily assigned) join in
JUSTICE ALBIN’s opinion. JUDGE CUFF (temporarily assigned) did
not participate.
30
SUPREME COURT OF NEW JERSEY
NO. A-62 SEPTEMBER TERM 2011
ON CERTIFICATION TO Appellate Division, Superior Court
WILLINGBORO MALL, LTD., a New
Jersey Limited Partnership,
Plaintiff-Appellant,
v.
240/242 FRANKLIN AVENUE,
L.L.C., a New York Limited
Liability Company; COLONIAL
COURT APARTMENTS, L.L.C., a
Delaware Limited Liability
Company; FESTIVAL MARKET AT
WILLINGBORO, L.L.C., a New
Jersey Limited Liability
Company; ROY LUDWICK; and
NAMIK MARKE,
Defendants-Respondents.
DECIDED August 15, 2013
Chief Justice Rabner PRESIDING
OPINION BY Justice Albin
CONCURRING/DISSENTING OPINION BY
DISSENTING OPINION BY
CHECKLIST AFFIRM
CHIEF JUSTICE RABNER X
JUSTICE LaVECCHIA X
JUSTICE ALBIN X
JUSTICE HOENS X
JUSTICE PATTERSON X
JUDGE RODRÍGUEZ (t/a) X
TOTALS 6