“Buyer’s Remorse” Notwithstanding, Federal Court Enforces Post-Mediation Memorandum of Understanding Settling Title VII Employment Discrimination Case

In McLeod v. Post Graduate Ctr. for Mental Health, No. 14-cv-10041, 2016 WL 6126014 (S.D.N.Y. Sept. 30, 2016), SDNY Magistrate Judge Francis issued a Report & Recommendation that the court grant defendants’ motion to enforce a post-mediation Memorandum of Understanding (MOU) settling plaintiff’s employment discrimination case pursuant to Title VII of the Civil Rights Act of 1964. (The court subsequently adopted the R&R, 2016 WL 6126383 (S.D.N.Y. Oct. 19, 2016).)

The facts, summarized:

Ms. McLeod, proceeding pro se, alleges that her former employers harassed and retaliated against her on the basis of her race in violation of Title VII []. The Court referred the case for mediation to the Court’s Alternative Dispute Resolution Program and assigned Ms. McLeod pro bono counsel for the limited purpose of representing her during the mediation.[]

Accompanied by their respective counsel, [the parties] attended the mediation on May 20, 2016. After several hours of negotiation, the parties filled out a memorandum of understanding, agreeing that Ms. McLeod would dismiss the action in exchange for a sum certain. (Memorandum of Understanding[]. They agreed on strict confidentiality, non-disparagement, a no rehire provision, non-admission language, and a reference letter with dates of employment. They further agreed that Ms. McLeod would execute a full release of all claims. The parties and their attorneys signed the MOU agreeing to settle the lawsuit.

Three days later, Ms. McLeod’s attorney telephoned defendants’ counsel to communicate that Ms. McLeod was not satisfied with the agreement. He followed up with an email stating, “[M]y client advises me that she has had a change of heart and would like to decline the offer.”

Defendants then filed a motion to enforce the MOU.

The law:

Parties may enter into a preliminary agreement, such as the MOU, that “provide for the execution of more formal agreements.” [P]reliminary agreements constitute binding contracts, ‘even if a more formal agreement never materializes. To determine if a preliminary agreement is binding, the key … is the intent of the parties: whether the parties intended to be bound. The court looks to four factors to determine whether a preliminary agreement is binding in the absence of a final executed instrument: (1) whether there has been an express reservation of the right not to be bound in the absence of writing; (2) whether there has been partial performance of the contract; (3) whether all of the terms of the alleged contract have been agreed upon; and (4) whether the agreement at issue is the type of contract that is usually committed to writing.

Applying the law, the court held that the four factors favored the enforceability of the Memorandum of Understanding. For example, regarding the first (and most important) factor, the court noted: “The language in the MOU conveys the parties’ intent to settle. Both parties and their attorneys signed the document formalizing the agreement.”

After determining that the MOU was enforceable, the court rejected the plaintiff’s attempt to rescind the settlement agreement.

“[O]nce reached, a settlement agreement constitutes a contract that is binding and conclusive and the parties are bound to the terms of the contract even if a party has a change of heart between the time of the agreement to the terms of the settlement and the time it is reduced to writing.”

The court rejected plaintiff’s argument that “a waiver must give an employee seven days to revoke his or her signature”, noting that while an amendment to the Age Discrimination in Employment Act of 1967 (the Older Workers Benefit Protection Act) provides for a seven-day revocation period, Title VII – under which plaintiff brought her claims – contains no such provision.

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