“Binding Mediation…Arbitration.” Confused? So Was the Court

The California Court of Appeals refused to enforce a settlement agreement when neither the Court nor the parties could understand a material term—dispute resolution by “binding mediation.”

In Lindsay v. Lewandowski, No. G033173, 2006 WL 1479775 (Cal. Ct. App. May 31, 2006), Lindsay and Lewandowski signed a stipulation for settlement after a private mediation. In one of the provisions, the parties agreed to “binding arbitration” of a dispute. The word “arbitration” was typed in above the word “mediation,” which had been crossed out.

Another provision of the agreement stated that Lindsay was to pay Lewandowski $190,000, but if the terms of payment could not be worked out, the dispute would be submitted to “binding mediation.” Over Lindsay’s objection, Lewandowski won a motion to compel arbitration under these terms, and ultimately won a confirmation of the award rendered during the “binding mediation.”

On appeal, the Court reversed the award, holding that the agreement was unenforceable because the term “binding mediation,” a material contract term, was so uncertain as to be unenforceable. As evidence of the confusion over the term, the Court quoted three conflicting definitions of “binding mediation” that were provided by the binding mediator in the case. The Court also sought guidance from the only decision to describe binding mediation, Frain v. Frain, 213 Mich. App. 509, 511-12 (1995), and an article about binding mediation. Still, the Court was unable to determine what the parties meant by the term “binding mediation.” Noting that in the other dispute resolution portion of the agreement the word “mediation” had been crossed out and replaced with “arbitration,” the Court said, “about the only thing that is clear is that the parties did not regard binding mediation as the equivalent of arbitration.”

The vagueness of the term rendered the agreement unenforceable, but the Court stated that even if it could enforce the agreement, it would have no idea what rules to apply: arbitration rules, court-ordered mediation rules, mediation confidentiality rules or some combination. The Court refused to place this burden on other appellate courts. The Court explained that to be enforceable, any binding mediation clause would need to address this issue in addition to addressing whether the facts presented to a fact finder as mediator could then be used at the arbitration portion of a session.