Given the pervasive use of e mail in business and in our lives in general, it is not surprising that a lot of disputes get settled via e mail. Indeed, there is a whole cottage industry including several web sites devoted to on-line dispute resolution.

Consequently, a recent federal district court case provides a cautionary tale about the pit falls of relying on modern technology. In In Re Tft-Lcd (Flat Panel) Antitrust Litigation, United States District Court, (N. D. Cal.), Multi-District Litigation, Case No. M 07-1827 SI, C 12-02214 SI, the Honorable Susan Illston, District Judge held that a settlement confirmed by e mail by a mediator upon acceptance of his mediator's proposal by all concerned was not admissible and thus not binding and enforceable because it did not contain the magical wording required by California Evidence Code Section 1123.

In June 2010, defendant HannStar Display Corporation ( "HanStar") pled guilty to a price fixing conspiracy regarding certain TFT-LCD devices sold in the United States. In June 2011, Sony and HannStar agreed to mediate the dispute. The mediation session did not result in a resolution. A few days later, the mediator e mailed a mediator's proposal to both parties. Each party accepted. Thus, the mediator e mailed both parties advising that a settlement had been reached.

About a month later, HannStar advised Sony that it "could not pay the amount set forth in the mediator's proposal. " (Id.) So, Sony sued, eventually filing a motion for summary judgment urging that the e mails taken together formed an enforceable and binding agreement which HannStar breached by failing to pay the agreed upon amount.

After briefly reviewing general mediation principles, the court honed in on California Evidence Code Section 1123:

California Evidence Code section 1123 provides one such statutory exception. This section enumerates four situations in which a written settlement agreement may be admissible:

(a) The agreement provides that it is admissible or subject to disclosure, or words to that effect.

(b) The agreement provides that it is enforceable or binding or words to that effect.

(c) All parties to the agreement expressly agree in writing, or orally in accordance with Section 1118, to its disclosure. .

(d) The agreement is used to show fraud, duress, or illegality that is relevant to an issue in dispute. (Id.)

Noting that the California Supreme Court held in Fair v. Bakhiari, 40 Cal 4th, 189, 197 (2006) that " "...a written settlement agreement arrived at through mediation is only admissible if it "include[s] a statement that it is "enforceable" or "binding" or a declaration on other terms with the same meaning" Id. at 199-200; see also id. at 192 ", the district court concluded that the mediation agreement is not admissible due to the lack of the necessary language required by California Evidence Code section 1123:

Here, although it may be inequitable to permit HannStar to avoid its agreement to settle, such inequity alone does not permit the Court to fashion a new exception to the mediation confidentiality statute. Rather, because the parties failed to include an affirmative statement to the effect that they intended their settlement to be enforceable or binding, the e-mails are inadmissible as evidence of settlement.

Accordingly, because Sony did not submit admissible evidence proving that it was entitled to judgment as a matter of law, the Court cannot grant summary judgment in Sony's favor. (Id.)

As is often the case, this dispute did not settle at mediation but rather soon thereafter with the continuing assistance of the mediator. The moral or "take away" is that whenever a dispute is settled via e mail and is one to which mediation confidentiality may have attached (even if the mediator is no longer "involved"), it is a wise practice to include the "magic words" of Section 1123 so that if the settlement goes awry, it can be enforced.

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By Phyllis G. Pollack

Phyllis G. Pollack is a full time neutral in Los Angeles where, as President of PGP Mediation, she focuses on business, real estate, contract and “lemon law” disputes. She may be reached at Phone: 213-630-8810 / phyllis@pgpmediation.com / Website: www.pgpmediation.com