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Get It In Writing – Even At Mediation: Top 5 Lessons from United Health Alliance

Disputes between health care professionals in a small community like Delaware are particularly well-suited for mediation.  The process provides a means for sophisticated litigants to resolve their disputes in private without having to air their “dirty laundry” on the town square.  The Morris James Health Care Team routinely urges our clients to participate in mediation in the hopes of avoiding trial.  Mediation works.  But it can be an exhausting process.  At the end of a long mediation that results in settlement, the natural inclination of the parties is to shake hands (or not) and go home with the understanding that the settlement documents will be drafted on another day.  Once upon a time a handshake was all that was required to seal a deal.  The Chancery Court’s recent decision in United Health Alliance, LLC v. United Medical, LLC, however, is a cautionary tale about going home without a signed agreement.  After a brief discussion of this recent Delaware court decision you will find the top 5 takeaways for navigating and avoiding, or successfully mediating, healthcare related disputes.

Parties are often comforted in taking the handshake now, written agreement after approach by the knowledge that the settlement was brokered by the mediator -- a neutral third party who was witness to the consummation of the deal.  And yet, as we see in United Health, mediators typically are either unable or unwilling to become involved in post-mediation disputes over the terms of the settlement.  Without written evidence of the essential terms of the settlement, parties are at risk that the other party to a mediated settlement may awaken the next morning with buyer’s or seller’s remorse and attempt to renege on the deal.  Taking the extra time, even after a long mediation session, to create a terms sheet or memorandum of understanding in which the parties, with the mediator’s assistance, commit to writing the essential terms of their settlement will go a long way to avoid misunderstandings down the road.  The document can also form the factual basis of a motion to enforce the settlement, if necessary, without having to seek out the assistance of the reluctant mediator to help make the case.

 The court in United Health ordered a dispute between a medical billing service and a medical practice management software provider to mediation.  After a lengthy mediation, the parties thought they had reached a settlement but did not commit several of the essential terms of the settlement to writing.  Days later, when the parties were exchanging documents to memorialize the settlement, a dispute surfaced regarding the scope of the release the plaintiff would offer the defendant.  This was a significant component of the settlement so the defendant filed a motion with the court to enforce the settlement in accordance with the terms the defendant believed had been negotiated at mediation.

Upon filing the motion to enforce, the defendant’s attorney sent an email to the mediator asking the mediator to state his understanding of the terms of the deal.  The mediator responded in a manner that supported the defendant’s view of the settlement.  Defense counsel then sought to take a sworn statement from the mediator in support of the motion to enforce but the mediator refused to give one.  Citing the confidentiality provisions of the court’s rule on mediation, and the terms of the agreement whereby the parties agreed to participate in mediation (which provided, inter alia, that the mediator would not serve as a witness for either party if the case did not settle), the mediator advised both parties that he would take no role in the motion to enforce the settlement.  The defendant then submitted the mediator’s email to the court arguing that it supported the defendant’s position with respect to the settlement.  The court refused to consider the affidavit, however, upon concluding that the email was hearsay and inadmissible without the mediator’s participation in the hearing on the motion to enforce.  The court further declined to compel the mediator to give testimony because to do so would “shatter” the confidentiality inherent in the mediation process and thereby limit its efficacy as an alternative dispute resolution tool.

So what can the Delaware healthcare industry learn from United Health?  A few things.

1)      Use experienced counsel to avoid disputes.  Choose competent counsel to prepare contracts, partnership agreements and the like.  When the written agreements spell out the parties expectations and rights with specificity, and in an enforceable manner, it is less likely either party will take grievances to the courthouse.  My partners, Kim Hoffman, Esq. and Richard Beck, Esq. explain how to choose a good real estate lawyer and why doing so is important in this January 2013 Voice of Experience article; this advice applies to all kinds of agreements. Hiring expert drafting counsel early can prevent hiring litigators later.

2)      If a dispute arises, agree to mediate.  It is less expensive and more private than litigation.

3)      Prepare for mediation.  Together with your counsel outline your “bottom line” financial position and other terms in advance so your attorney is prepared to commit it to writing.

4)      Keep settlement agreements simple.  Basic agreements can be committed to writing quickly.  If certain complex issues defy simplicity, limit the agreement to a short terms sheet or memorandum of understanding.  Alternatively, commit everything else to writing and agree to reconvene mediation at a later date to hammer out the rest, perhaps after some official exchange of agreements.

5)      Write it and sign it!  Otherwise you may have wasted your time and effort to mediate your dispute.

[1]  See e.g. Total Care Physicians, P.A. v. O’Hara, 2002 WL 31667901 (Del. Super. Oct. 29, 2002) (decision after a public trial where the sorted facts relating to a professional separation were outlined in great detail in a published opinion of the court) ; Dickinson Medical Group, P.A. v. Foote, 1984 WL 8208 (Del. Ch. May 10, 1984) (same).

[2] C.A. No. 7710-VCP (Del. Ch. May 6, 2013).

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