Summary. Everything that has to be decided, in the order it comes up.

Phase 1 — Before the negotiation

Value it

  • Realistic verdict range
  • Probability of liability at each stage
  • Remaining cost to judgment, and through appeal
  • Fee exposure both directions if a fee-shifting statute applies
  • Collectability
  • Non-monetary value: distraction, publicity, relationships, injunction risk
  • Time value
  • Reservation price written down before the mediation

Identify the structural issues

  • Fee waiver required? (Permissible under Evans v. Jeff D.)
  • Consent decree required or refused? (Confers prevailing party status; a private agreement generally does not — Buckhannon)
  • Deferred payments?
  • Ongoing obligations?
  • Court approval required — class, minor, bankruptcy, derivative, wage-and-hour, government?
  • Liens on the recovery?
  • Confidentiality essential, and can the client comply?
  • Material to be returned — trade secrets, confidential documents?
  • Will the agreement be filed, defeating confidentiality?

Confirm authority

  • Who can bind the client, and to what amount — in writing, with a number
  • Board or committee approval required? By when?
  • Insurer consent? Hammer clause?
  • Government approvals, and are they public?

Phase 2 — The mediation

  • Mediator selected for subject familiarity, style, and follow-up availability
  • Statement submitted that is actually useful — weaknesses, obstacles, objectives
  • Decision-maker present, not reachable by telephone
  • Client prepared: the case will be attacked; the first number will be insulting; not settling is acceptable
  • Joint session considered — frequently the only time the other side hears it directly
  • Non-monetary terms identified as trading material
  • Rule 408 protection understood, and not treated as absolute

Phase 3 — The term sheet — SIGNED BEFORE ANYONE LEAVES

  • Amount, timing, payee
  • Who releases whom, by name, including affiliates
  • Scope: claims covered; known and unknown; through what date; carve-outs
  • Fees and costs included or not
  • Dismissal mechanism and retained jurisdiction
  • Confidentiality in outline, with essential carve-outs
  • Ongoing obligations
  • Material to be returned
  • "This term sheet is binding" — stated expressly
  • Deadline for the definitive agreement

Phase 4 — The release

Releasing parties

  • Named plaintiff
  • Affiliates, subsidiaries, parents that hold claims
  • Successors and assigns
  • Individuals with separate claims (e.g., owners of a closely held plaintiff)
  • Assignees, where a claim was assigned

Released parties

  • Named defendant
  • Past, present, and future parents, subsidiaries, affiliates, predecessors, successors, assigns
  • Officers, directors, employees, agents, attorneys
  • Insurers
  • In their capacities as such

Scope

  • General or specific — decided deliberately
  • Unknown claims: expressly covered or not, with the applicable state waiver if comprehensive
  • Through what date — Effective Date, or otherwise
  • Carve-outs: claims under the agreement; specific pending matters; workers' compensation; vested benefits; administrative charge rights; indemnification under governing documents; future conduct
  • Counterclaims released
  • Language reaches tort as well as contract claims if comprehensive resolution is intended

Phase 5 — Enforcement — BEFORE DISMISSAL

Kokkonen: dismissal does not give the court power to enforce.

  • Retained jurisdiction in the dismissal order, with proposed language
  • Or terms incorporated into the order
  • Or a consent judgment — enforceable by contempt
  • Or conditional dismissal with a reinstatement right
  • Confession of judgment on payment default, with a cure period
  • Default defined; cure period stated; consequence specified

Rule: if any obligation extends past dismissal, obtain retained jurisdiction.

Phase 6 — Confidentiality

  • What is confidential: amount / terms / existence / underlying facts — decided separately
  • Who is bound: parties and counsel; obligation to instruct personnel
  • Carve-outs:
    • Compelled disclosure, with notice where permitted
    • Accountants, auditors, tax authorities
    • Insurers and lenders
    • Enforcement of the agreement
    • Communications with government agencies — expressly preserved
    • Already public information
  • Remedy: liquidated damages with a reasonableness recital; injunctive relief with an irreparable-harm stipulation
  • Non-disparagement, if included: covered statements; truthful statements; testimony carve-out; mutuality
  • No-rehire and non-cooperation provisions checked against local restrictions
  • Can the client actually comply with its own contractual disclosure obligations?

Phase 7 — Money mechanics

  • Allocation among claim types — drives tax and insurance
  • Payee and payment method; wire instructions verified through a separate channel
  • Timing, with cure period and default consequence
  • Security for deferred payments: guaranty, letter of credit, escrow, confession of judgment
  • Tax reporting: which forms, to whom, identification numbers exchanged
  • Tax adviser consulted before signing where amounts are meaningful

Phase 8 — Liens and third-party interests

  • Recipient asked in writing to identify every interest
  • Searches run for recorded judgments and liens
  • Categories checked: medical provider; health plan; government payor; workers' compensation; prior counsel; litigation funder; judgment creditors; child support; bankruptcy trustee
  • Payoff figures obtained with validity dates
  • Reductions negotiated where available
  • Disbursement conditioned on releases
  • Joint payee or escrow where an interest is disputed
  • Indemnity from the recipient for undisclosed interests
  • Net recovery calculated and explained to the client

Phase 9 — Insurance

  • Carrier's posture: defending, reservation of rights, or denial
  • Consent obtained; hammer clause reviewed
  • Allocation between covered and uncovered claims negotiated, not defaulted
  • Multiple carriers and layers addressed
  • Independent counsel entitlement considered where a conflict exists
  • Excess exposure and any bad faith position documented

Phase 10 — Material to be returned

  • Certification of return or destruction, with a deadline
  • Covers the party, counsel, experts, and vendors
  • Covenant not to use or disclose
  • Protective order obligations survive independently
  • A trade secret claim settled without recovering the trade secret has sold it

Phase 11 — Court approval, if required

  • Class: Rule 23(e) notice, hearing, fair-reasonable-adequate finding
  • Side agreements disclosed
  • Structure reviewed for: claims-made rates, cy pres, clear sailing, reverter, coupon relief, fee proportionality
  • Minor: guardian, court approval, structure or blocked account
  • Bankruptcy: trustee or debtor approval on notice
  • Derivative: notice and corporate benefit showing
  • Wage and hour: court or agency approval
  • Timeline built into the deal; payment keyed to approval
  • What happens if approval is denied

Phase 12 — Closing

Signatures

  • Every releasing and released party
  • Authority confirmed for entity signatories
  • Guardian or court approval where required
  • Lienholder releases
  • Insurer consent

Money

  • Payment made and confirmed
  • Lien payoffs disbursed; releases received
  • Escrow closed
  • Tax forms issued

Court

  • Dismissal filed with retained-jurisdiction language
  • Consent judgment entered, if used
  • Approval order entered
  • Pending motions withdrawn; settings vacated

Materials

  • Return or destruction certified
  • Vendor and expert files closed
  • Litigation holds released except where other matters require retention

Ongoing

  • Client debriefed on confidentiality and non-disparagement
  • Obligations circulated to the people who must comply
  • Payment dates, cure periods, and restriction expirations calendared
  • One-page summary of surviving obligations in the client's file

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