Are Mediated Settlement Agreements Enforceable in Texas?

By Brett Goodman

The background rule for enforceability of mediated settlement agreements, as described in the Texas ADR Act, provides that the settlement agreement is enforceable as any other contract, and the court may incorporate the terms of the settlement agreement into the court’s final decree. See Tex. Civ. Prac. & Rem. Code Ann. § 154.071. Although the settlement agreement arises from the suit, enforcement of a mediation agreement, even if reached through court-ordered mediation, must be determined in a breach-of-contract cause of action under normal rules of pleading and evidence. See Cadle Co. v. Castle, 913 S.W.2d 627 (Tex. App. – Dallas 1995, writ denied). Thus, any mediated settlement is enforceable as a contract. See Hardman v. Dault, 2 S.W.2d 378, 380 (Tex. App. – San Antonio 1999, no pet.) (citing C.P. & R.C. § 154.071(a)).

A wrinkle is added in to this provision of the Texas ADR Act when reconciling with Rule 11 of the Texas Rules of Civil Procedure, which states, “Unless otherwise provided in these rules, no agreement between attorneys or parties touching any suit pending will be enforced unless it be in writing, signed and filed with the papers as part of the record, or unless it be made in open court and entered of record.” Tex. R. Civ. P. 11.

Though Rule 11 has antiquated roots in avoiding litigation, the recent proliferation of mediation has created a conflict between a largely unchanged rule from over a century ago being applied to a relatively new practice. See Kennedy v. Hyde, 682 S.W.2d 525, 526 (Tex. 1984). In Kennedy, the court made a first order determination that settlement agreements must comply with Rule 11 regardless of Rule 11 originating from before 1900. Id. at 530. Eleven years after the Kennedy decision, however, the Supreme Court of Texas was able to finagle a way around the constraints of the Kennedy court through semantics concerning the filing requirement of Rule 11. See Padilla v. LaFrance, 907 S.W.2d 454, 461 (Tex. 1995). The agreement in Padilla had been signed as required by Rule 11, but the Court did not find important when the agreement was filed, thereby minimizing the strictness of Rule 11. See id. Following Padilla, then, mediation settlement agreements should comply with Rule 11’s three requirements to be valid, but there is wiggle room within the application. See id.

With this background on Rule 11, some case law can be considered. Recent case law shows instances of both upholding and striking down mediated settlement agreements for various reasons. In Castano, the San Felipe Company ran water through a ditch on Castano’s land, leading to a cause of action for trespass as well as claims for emotional distress. See Castano v. San Felipe Agric., Mfg., & Irr. Co., 147 S.W.3d 444, 446 (Tex. App. – San Antonio 2004, no pet.). After San Felipe altered the mediation agreement and Castano did not agree, San Felipe filed and was granted a summary judgment motion against Castano for breaching the settlement agreement. Id.The higher court dismissed the issue fairly quickly; noting that mediated settlement agreements are to be enforced as contracts, the court found there was a valid agreement signed by both sides and so Castano was bound by said agreement. Id. at 451.

Mediated settlement agreements are not the final word of authority and can be superseded by other means. See Pickell v. Guar. Nat. Life Ins. Co., 917 S.W.2d 439, 440 (Tex. App.–Hous. [14th Dist.] 1996, no writ). Guaranty Life Insurance Company filed suit against Pickell, an insurance salesman, for tortuous interference stemming from alleged purposeful misstatements Pickell made to policy holders. Id. Although a mediated settlement agreement seemed to have been reached, certain documents were not returned to Guaranty, leading to a default judgment being entered against Pickell at trial when he did not appear at trial relying on the apparent settlement. Id. Noting its sympathy toward Pickell’s plight, the court still determined that Pickell was required to be at trial in spite of the perceived mediation agreement. Id. at 443. “Although most judges probably would have inquired further and attempted to contact Mr. Pickell to find out why he was not at the pre-trial conference or trial, or to inquire further about the settlement,” the court admitted, “a trial court is not required to take such steps when a litigant fails to appear for the pre-trial conference or trial.”Id.

A recent mass tort litigation case is similar to Pickell, in that, although an agreement pursuant to Rule 11 seemed to be reached, it did not designate a specific dollar amount, meaning that defendants were not bound to any mediation settlement agreement. See Authorlee v. Tuboscope Vetco Intern., Inc., 274 S.W.3d 111, 121 (Tex. App. — Hous. [1st Dist.] 2008, pet. denied).

Technorati Tags: law, ADR, arbitration

Brett Goodman is a summer intern at Karl Bayer, Dispute Resolution Expert. Brett is a J.D. candidate at The University of Texas School of Law. He holds degrees in Finance, Mathematics, and Spanish from Southern Methodist University.