Not too long ago Sony Corporation, the global tech giant, made an innocent mistake that has since cost it several years in court and the legal fees to match. In a nutshell, Sony didn’t get a clear, written settlement agreement after its mediation with HannStar Display Corp.
Some background: HannStar (an LCD screen supplier) pled guilty in 2010 to participating in what the U.S. Department of Justice has called “the most serious price-fixing cartel ever prosecuted in the United States.” Shortly thereafter, Sony and HannStar turned to mediation to resolve the civil issues between them. After some back and forth, their mediator emailed a settlement proposal which HannStar apparently agreed to. Later, however, HannStar argued that it wasn’t required to make any payments to Sony because no enforceable settlement agreement had ever been created.
The parties ended up in federal court in California over the issue, and on Sony’s request for summary judgment, the trial court concluded that there was no enforceable settlement agreement because Sony and HannStar “failed to include an affirmative statement to the effect that they intended their settlement to be enforceable or binding.” In re TFT-LCD (Flat Panel) Antitrust Litig., No. C 12-02214 SI, 2013 WL 6326707, at *4 (N.D. Cal. Dec. 3, 2013).
Now Sony is appealing the decision, and it may happen that Sony wins its appeal. However, even a victory on appeal cannot undo the time and expense that Sony has incurred because it didn’t get a clear, written settlement agreement in the first place.
What can Utah business owners learn from Sony’s debacle? One lesson is obvious: if you reach any kind of agreement in a mediation, make sure that your agreement is in writing and signed by all parties.
This is, of course, a good idea for any settlement agreement. It is especially important in the mediation context, however, because Utah courts simply will not enforce oral agreements reached in mediation. Reese v. Tingey Const., 177 P.3d 605, 609 (UT 2008). Luckily, Utah law does not impose on Utah business all of the restrictions that California law has imposed on Sony. However, Utah does require all settlement agreements reached in mediation to be in writing in order to be enforceable in the courts.
In sum, mediation often has many benefits that make it preferable to fighting out your issues in court: more flexibility, less formality, more speed, less expense, more privacy, more satisfaction, and so forth. But if the other side gets “settler’s remorse” after the mediation has been completed, you will need a written agreement in order to have a legal right of enforcement.