July 12, 2024 – A mediation term sheet created as a prelude to a final settlement agreement is unenforceable because several of its material terms are indefinite, the Wisconsin Court of Appeals (District I) has ruled in an unpublished opinion Mueller v. TL90108, 2022AP1440 (June 11, 2024).

Richard Mueller and Joseph L. Ford once owned a 1938 Talbot Lago.

The Talbot Lago is a stylish coupe with sweeping curves, tear-drop-shaped rear wheel covers, and a grille like a fencing mask. It was made by a French company that went out of business in 1959.

In 2001, the Lago went missing from the Milwaukee garage where Mueller and Ford stored it. The police later discovered that someone shipped the Lago to Europe, using fraudulent documents.

In 2015, TL90108, LLC (TL90108) purchased a 1938 Talbot Lago from an international car broker. At the time, the Lago was worth $7 million.

Title Application Triggers Lawsuit

In 2016, TL90108 applied for a title for its Lago in Illinois.

The title application triggered a search of a stolen car database, which revealed that the Lago purchased by TL90108 was the one that went missing from Muller and Ford’s garage.

Mueller and Ford sued TL90108 for replevin and a declaration of ownership in Milwaukee County Circuit Court.

The circuit court granted TL90108’s motion to dismiss. The Wisconsin Court of Appeals reversed that decision and the Wisconsin Supreme Court affirmed the decision, with modifications, and remanded the case.

Mediation Muddle

Or remand, David E. Jones, a former federal magistrate judge, held a day-long mediation in September 2021.

At the end of the mediation, the parties signed a two-page settlement-in-principal term sheet (Term Sheet). The Term Sheet included a section for releases and dismissals of claims.

The section on releases and dismissals contained the following bullet points:

• the parties will negotiate and agree to the terms of a final settlement agreement in good faith;

• the mediator will resolve any disputes involving the final settlement agreement;

• the terms of the final settlement agreement will include mutual confidentiality and non-disparagement provisions;

• the only public statements that Ford and Mueller and [TL90108] will make with respect to the settlement are the following: “We amicably resolved our dispute;” and

• the parties agree that the Term Sheet contains material terms and is fully enforceable under Wis. Stat. section 807.05.

After the parties signed the Term Sheet, Ford’s attorney filed a letter with the court advising that the parties had agreed to settle the lawsuit.

Dueling Documents

Over the next few weeks, the parties exchanged draft versions of different settlement documents; they also took part in two more mediation sessions.

Jones asked the parties to submit proposed versions of the final settlement agreement and comment on the other party’s proposed versions.

On June 1, 2022, Jones gave the parties copies of his completed work on the proposed settlement agreement and documents related to it.

No Deal

On June 7, 2022 Mueller and Ford told TL90108 that they wouldn’t sign the final settlement documents.

TL90108 moved to enforce the settlement on the following grounds: 1) the Term Sheet, standing alone, was enforceable; and 2) Jones had the authority to draw up the final settlement documents, and those documents were binding and enforceable.

Mueller and Ford cross-moved to declare the Term Sheet unenforceable and the related documents invalid.

On July 29, 2022, the circuit court denied enforcement of the Term Sheet, on the grounds that the material terms “confidentiality” and “non-disparagement” were indefinite.

TL90108 appealed.

Contract Law Applies

The Court of Appeals began its per curiam opinion by explaining that in construing a mediated settlement, it applies principles of construction borrowed from contract law.

“To be enforceable, a contract ‘must be definite and certain as to its material terms and requirements,’” the Court of Appeals wrote. “Thus, ‘vagueness or indefiniteness concerning a material term prevents the creation of an enforceable contract.”

The Court of Appeals concluded that “non-disparagement” as used in the Term Sheet was indefinite because neither the term’s scope nor duration were made clear in the document.

“There is no definition of who or what cannot be disparaged,” the Court of Appeals wrote. “For example, it is not clear whether disparagement is limited to the parties or their business interests.”

The Court of Appeals concluded that “confidentiality” was also fatally indefinite.

“As Mueller and Ford contend, the confidentiality provision does not specify whether confidentiality was limited to the settlement or covered information beyond the settlement,” the Court of Appeals wrote.

TL90108 argued that documents related to the Term Sheet defined confidentiality. But the Court of Appeals dismissed that argument.

“If the [Term Sheet], however, had contemplated other documents to define confidentiality, it would have specifically referenced or identified those documents,” the Court of Appeals wrote.

“Additionally, the need to consider other documents underscores that the meaning of confidentiality is not clear from the [Term Sheet] alone.”

Mediator’s Authority Limited

Mueller and Ford argued that because the Term Sheet was unenforceable, all its terms were void and thus there was no valid delegation of authority to Jones.

TL90108 argued, however, that the Term Sheet specified that the mediator was to resolve any disputes regarding the final settlement agreement.

The Court of Appeals agreed with Mueller and Ford.

“As the circuit court found, the [Term Sheet] only provides Judge Jones with authority to resolve disputes about the final settlement agreement itself, not disputes involving the creation or negotiation of the final settlement agreement,” the Court of Appeals wrote.

The Court of Appeals affirmed the circuit court’s order.