Recent Developments in Dispute Resolution 7/03/97

Mediated settlement is no mistake

Sheng v. Starkey Laboratories (8th Cir, Jun 27, 1997)

     Former Employee sued former Employer under Title VII.  Pending
     a decision on Employer's motion for summary judgment, the
     court ordered attendance at a mediated settlement conference
     on Monday.  The previous Friday the court signed an order
     granting summary judgment to Employer and mailed copies to
     counsel, but the order was not entered in the docket and the
     clerk did not enter judgment.  At Monday's conference with a
     magistrate, unaware of Friday's events, the parties agreed
     that Employee would dismiss all claims in exchange for
     Employer's payment of $73,500.  When the magistrate told the
     court of the agreement, the court rescinded the summary
     judgment.  Later Monday the parties received copies of all the
     papers, and on Tuesday the court dismissed the action on the
     ground it had been settled.

     After an evidentiary hearing before another judge, the court
     found that the parties had reached agreement on all essential
     terms, but the agreement was unenforceable on the ground that
     it was based upon both parties' mistaken assumption that
     summary judgment had not been granted.  The court rescinded
     the dismissal order and reinstated the summary judgment order
     in favor of Employer.  Employee appealed.

     The 8th Circuit held that the settlement agreement was an
     enforceable contract.  Employer cannot avoid the contract on
     the ground of "mistake."  (1) The parties had a mutual mistake
     as to the value of the case, but no mistake as to the "very
     nature of the deal."  Even if the parties had known of the
     summary judgment, litigants who win summary judgments
     routinely settle with their opponents.  (2) Employer assumed
     the risk.  It knew the order was pending, and chose the
     certainty of settlement over the gamble on a ruling on the
     motion.

Full text --

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          "Recent Developments in Dispute Resolution"
       Willamette University Center for Dispute Resolution
       Willamette University College of Law, Salem, Oregon
       Ross Runkel, Editor         Richard Birke, Director
       rrunkel@willamette.edu        rbirke@willamette.edu
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