Now What Happens?: Addressing Contingencies to Mediation Settlement Agreements in Trust Cases

Tue, Dec 31st, 2024 | by Miles Mediation and Arbitration | Article | Social Share

By Dave Connor

Representing a client in a trust case? A signed mediation settlement agreement (MSA) needn’t mean that your work is done. The requirement of a signed final MSA, while indispensable, nevertheless can present serious challenges where settlements regarding complex trusts frequently depend on non-monetary conditions. These, in turn, bring into play post-mediation contingencies such as trust modifications, changes of trustee, appointment of trust protectors, representative protection or minors and the disabled, reallocation of trust assets, administrative approvals and tax opinion letters.

Not infrequently, the document that is necessary to effectuate the settlement is nearly as lengthy as the trust document that is the subject of litigation, although it has been generated with far less care by the loose cooperation of lawyers in an exhausted environment. So, it’s not surprising that this unavoidable rush can wind up generating more problems than it solves by producing a flawed or incomplete document that fails to adequately address such contingencies.

That’s the bad news. The good news is that there are three potential solutions that can help avoid problems in the future: a clause for re-mediation: a clause for post-mediation court action; and/or a clause for post-mediation arbitration. As a mediator of trust cases, I’ll explore each of these clauses in turn.

Option #1: A Re-mediation Clause

“Re-mediation” is, of course, mediating again, but, in this context, for the limited purpose of resolving whatever gaps or failed contingencies there are in the MSA. While mediating a trust case more than once is nothing new, the foresight to include a re-mediation clause often is. The clause binds the parties to continue to mediate a narrowed range of issues bounded by the MSA prior to any further court proceedings, which concludes, if successful, with a binding amendment to the MSA. An objection might be made that such a clause erodes faith in the MSA itself, but it actually tends to set the parties’ expectations appropriately in complex cases, so that, if a bump in the road occurs, they are more likely to remain committed to settlement.

Further objection may be made that it invites parties to mediate the entire case again; however, the clause only activates if the original MSA is not enforceable on its face due to some failed contingency. Granted, the success of a re-mediation is not guaranteed, and its failure leaves the parties with an unenforceable MSA. However, a speedy return to mediation in such circumstances enhances the chance that the parties’ original settlement can be salvaged. In addition to re-mediation, post-mediation court action or arbitration are more reliable, but more protracted, solutions.

Option #2: A Court Action Clause

The general requirement of court approval of MSAs in trust cases is common, given the court’s general supervisory power over trusts under the Uniform Trust Code (“UTC”), and the contingencies listed above are almost boilerplate in trust-related MSAs. However, while court approvals, such as orders modifying trusts or addressing the best interests of minors or disabled beneficiaries, involve some scrutiny of the beneficiaries’ best interests, they do not authorize the court to rearrange the bargains made at mediation. Yet a court can be authorized to perform such a rearrangement to a limited degree by the terms of the MSA itself.

This form of post-mediation court action to salvage an MSA may seem dubious, given a court’s inability to make a settlement for the parties, but such a clause may allow the court to make minor readjustments which mend the bargain made in settlement without remaking it. An example might be a reallocation of assets or funds which fails to pass tax scrutiny that can be replaced by another reallocation that does within the fair parameters of settlement. The parties’ choice of a substitute trustee for trust protector who is unable to serve can also be selected by the court under the general powers of the UTC.

A final example might be the court’s determination of how the interests of a mistakenly unrepresented minor or other under a disability might be addressed with minimal revision of the MSA. While drafting such a clause allowing such judicial intervention will be a brainteaser in some cases, shrewd lawyers who want to avoid additional litigation and who are familiar with any frailties in the MSA should rise to the occasion. Note too that although such a clause does envision a return to court, those proceedings are necessarily far more restricted, requiring far less time and expense than returning to the original trust litigation.

Option #3: An Arbitration Clause 

The final option to a failed trust MSA, which may be the best overall, is arbitration. Some of the advantages of arbitrating the defects of an MSA are, first, that a standard arbitration clause can be inserted in any MSA, just like any contract, and will fall under the clear and well-worn procedures and substantive law of the relevant state or federal arbitration act or code, leaving the parties in no doubt about how to proceed. Secondly, the natural choice of arbitrator is frequently the mediator herself or himself, who already possesses an advanced understanding of the quid pro quo, background, and parties’ positions that gave rise to the MSA in the first place. Finally, the nature of arbitration, with its diminished focus on legal forms and technicalities and increased speed and simplicity, seems better suited to determining how to best salvage the parties’ settlement, if that is at all possible. Note that, if the MSA is truly completely beyond saving, then the arbitration clause can either leave the resulting case with the arbitrator or return it to the court for further original proceedings.

As an attorney and mediator who handles probate and trust cases, I’m sure that every trust and probate litigator has left at least one mediation with a distinct “wing and a prayer” sensation about the lengthy MSA he or she helped draft. The above three kinds of post-mediation clauses, for re-mediation, court action, or arbitration, can provide confidence that, in the event of a “hiccup” based on unavoidable contingencies, the MSA can be mended and will ultimately hold.

*Originally published in the Daily Report and reprinted with permission.

About Dave Connor

Dave Connor is a newly Certified Florida Circuit Civil Mediator. His experience includes 40 years of diverse trial practice that included both civil and criminal cases in state and federal courts at the trial and appellate levels of three states, with over 30 years in central Florida.