We live in an age when people see real merit in avoiding the time and expense of a formal trial before judge and jury. As we noted in our article of a few days ago, markets wait for no one and today’s deal can become tomorrow’s calamity. Mediation offers the middle ground. A neutral person listens to each side’s perspective and then tries to craft a middle ground. In concept, it makes sense. In practice, the middle ground is often an icy patch.
Glass v. Yaffe, a non-precedential case decided on January 20, 2025 is a business dispute case involving families that own Philadelphia’s venerable men’s haberdashery, Boyds. The fight had been underway for several years when a Philadelphia Court appointed a retired judge to mediate the dispute. The process seemed to move at lightning speed because there was a settlement proposal communicated by means of a “term sheet” within two months of the mediator’s appointment. As typically occurs the proposal insisted that it be accepted in writing within four days.
The party receiving the settlement proposal did sign within the allotted time with the following additional provision. “Subject to execution of settlement and related documentation satisfactory to the [party accepting the settlement offer.]” In an interesting twist, if the parties did not immediately come to terms with respect to the final settlement, the appointed judge/mediator was to resolve any drafting disputes.
Now, the glue starts to set. Seven months after the term sheet was signed, the parties who accepted that term sheet filed a petition to enforce it as binding. Seven months after that a rule was entered demanding to know why that relief should not be granted. In a curious twist the parties agreed that “the term sheet was unambiguous and there were no disputed issues of fact.” The Court decided on those facts that the deal was the deal despite language that referred to the mediation process as “confidential” and “absolutely privileged.” The Superior Court affirmed the trial court finding that there was a binding agreement based on the term sheet. But, in an unusual twist, the court reversed the trial court decision to “settle, discontinue and end” the case. Instead it remanded the case to ascertain whether there were any issues unresolved by the term sheet.
This is a cautionary tale and one that merits any mediating parties to carefully examine Field v. Golden Triangle Broadcasting, 305 A.2d 689 (Pa. Supreme 1973) and Toppy v. Passage Bio Inc., 285 A.3d 672 (Pa. Super 2022). The trial court found that the term sheet contained all the terms necessary to resolve the underlying commercial dispute. The mere fact that a final settlement document was contemplated and that it might contain language about which there could be disagreement did not undermine the existence of an agreement to resolve the dispute. In making the remand, the Superior Court signaled that it did not intend to suggest all matters were resolved. But, the matters set forth in the term sheet were fixed and agreed such that they merited judicial enforcement in a world where neither party asserted that the term sheet was ambiguous or otherwise deficient.
The clear message here is the mediating parties can’t wiggle out of otherwise clear settlement terms by reference to a subsequent document or resort to terms about “draft” and “privilege.” It does not appear that this issue was in controversy here, but the other matter of note was language making the mediator into an arbitrator should there be a dispute about the subsequent document.
When they get to “settled”, clients need to take a pause and ask whether they can live with the term sheet. That document is vital to a well-organized settlement but it may be final unless precautions are taken to assure it is not.
The case: J-A27018-25m – 106648666343832010.pdf