Kaiser Foundation Health Plan of the Northwest v. Doe

• Decision Date: 13 September 1995
• Parties: KAISER FOUNDATION HEALTH PLAN OF THE NORTHWEST, an Oregon nonprofit corporation, Appellant, v. Jane DOE, Respondent. 9309-05955; CA A85958.
• Court: Oregon Court of Appeals

Page 375

903 P.2d 375

136 Or.App. 566

KAISER FOUNDATION HEALTH PLAN OF THE NORTHWEST, an Oregon nonprofit corporation, Appellant, v. Jane DOE, Respondent.

9309-05955; CA A85958.

Court of Appeals of Oregon.

Argued and Submitted May 26, 1995.

Decided Sept. 13, 1995.

E. Joseph Dean, Portland, argued the cause for appellant. With him on the briefs were Christine Kitchel, John V. Acosta and Stoel Rives Boley Jones & Grey.

Kathryn H. Clarke, Portland, argued the cause for respondent. With her on the brief were Stephen F. Crew, Gary Firestone and O'Donnell Ramis Crew Corrigan & Bachrach.

Before WARREN, P.J., and EDMONDS and ARMSTRONG, JJ.

EDMONDS, Judge.

Plaintiff appeals a judgment for defendant on a claim that sought a declaration that the parties had entered into an enforceable oral settlement agreement and specific enforcement of the same. ORS 28.010 et seq. Plaintiff argues that the court erred in holding that the agreement was not binding. We review de novo, ORS 19.125(3), and reverse.

Defendant is a nurse who was employed with plaintiff for several years. In 1993, she notified Myrna Baker, the Director of Human Resources for plaintiff, that she had been sexually harassed by one of plaintiff's doctors, "Smith." ¹ Defendant thereafter filed a grievance with her union and a complaint with the Bureau of Labor and Industries (BOLI) against Smith, plaintiff, and plaintiff's local affiliate.

One of plaintiff's attorneys, Eileen Drake, contacted defendant's attorney, Henry Kaplan, regarding the allegations and the possibility of settlement. Ultimately, defendant agreed to mediate her complaints with a private mediator. On the morning of August 18, 1993, the parties began a mediation conference that included the mediator, Baker, plaintiff's attorneys, defendant and her husband, Kaplan, and Smith's attorney. The mediator placed the parties in separate rooms and contacted each party separately during the mediation process. During that time, defendant and her husband had no contact with anyone except the mediator and Kaplan. At midday, the parties' attorneys met with the mediator for lunch to discuss the case. Plaintiff's attorneys apprised Kaplan of some evidence that they had discovered regarding defendant's conduct at work and explained that defendant would possibly be subject to disciplinary procedures, should she continue to work for plaintiff. After lunch, Kaplan shared this information with defendant. Late in the day, the attorneys, after meeting with the mediator, arrived at a proposed agreement, which Kaplan urged defendant to accept. The terms of the proposal included a cash payment from plaintiff in exchange for defendant's agreement to resign voluntarily from plaintiff's employment. Defendant wanted a few days to think about the proposal, because she had anticipated a settlement that would permit her to retain her job. However, plaintiff's attorneys said that the offer would be withdrawn if it was not accepted on that day. Thereafter, defendant authorized Kaplan to accept the terms of the offer, but instructed him to wait a few hours before notifying plaintiff of the acceptance.

Thereupon, defendant and her husband left for dinner, and Kaplan returned to the mediation site where all the attorneys signed a document to confirm the terms they had agreed constituted the offer. The document read:

"Essential Terms of Agreement

"[Plaintiff], [plaintiff's local affiliate], and [Smith] will pay [defendant] the sum of $65,000

"[Defendant] will voluntarily resign effective immediately

"[Defendant] will not reapply to [plaintiff] or [plaintiff's local affiliate] for employment in the future

"The settlement agreement will include a mutual confidentiality clause

"[Defendant] may say 'the parties have resolved their differences,' 'I have reached a mutually acceptable basis for voluntarily quitting,' 'I've decided to move to another position'

"The settlement agreement will include an arbitration provision

"[Plaintiff] will not challenge any rights [defendant] may have to unemployment benefits

"[Defendant] will receive the value of any accrued vacation

"[Defendant's] pension rights will not be affected

"[Defendant] will prepare and file any documents necessary to dismiss the BOLI claim, her workers' [compensation] claim and union grievance (all with prejudice)

"The settlement agreement will include and [sic ] complete and full mutual release

"[Defendant] will be provided assistance with resume preparation and interview skills through Career Makers"

After the attorneys signed the document, Kaplan told plaintiff's attorneys that he would contact them within a few hours with either defendant's acceptance or rejection of the proposed agreement. The attorneys agreed that if defendant accepted the terms, Christine Kitchel, one of plaintiff's attorneys, would draft a formal settlement agreement for all the parties to sign.

Later that evening, Kaplan contacted Kitchel to clarify the breadth of the confidentiality provision in the agreement. He testified at trial that he was concerned that the way they "had worded and discussed the confidentiality provision, [defendant] couldn't even talk about [the sexual harassment] to her psychotherapist * * *." Kitchel and Kaplan then agreed that the confidentiality provision would not prohibit defendant from discussing the case with her psychotherapist. Kaplan called Kitchel a second time to make certain that the money received in the settlement would be characterized by plaintiff for tax purposes as compensation for pain and suffering. After receiving a satisfactory answer from Kitchel, Kaplan told Kitchel that defendant had accepted the terms. He then notified the mediator that they had "settled the case." He also notified defendant either before or after his second call to Kitchel that he was about to accept, or had just accepted, the settlement terms on defendant's behalf.

Two days later, defendant notified Kaplan that she declined to settle her claims. On August 26, she sent a letter to Kaplan which stated:

"As of August 20, 1993, I rescinded on a verbal agreement with Kaiser which I made under extreme duress."

Meanwhile, on August 25, Kitchel had delivered to Kaplan a draft of a proposed written settlement. Kaplan notified Drake on August 30 that defendant did "not wish to enter into a settlement agreement along the lines we discussed at the mediation session on August 18." This lawsuit resulted.

Plaintiff's complaint alleges that the parties reached a valid and enforceable oral settlement agreement on August 18, 1993. It seeks a declaration to that effect, a judgment compelling arbitration or, in the alternative, specific performance, and an injunction enjoining defendant from pursuing any further claims arising from the incident with Smith. After a trial to the court, the court found that defendant had accepted the settlement through Kaplan, and that the terms were sufficiently definite to be enforceable. Nevertheless, it ruled that the agreement was unenforceable because defendant had not signed a written agreement. ²

Plaintiff first assigns error to the court's ruling that a settlement agreement arising out of mediation must be in writing. As plaintiff points out, the court did not cite any authority in support of its holding. Defendant argues that, as a matter of law, agreements reached during mediation should be in writing, because that is "in accord with the expectations of the legal community," due to the confidential nature of mediation, and because most of the negotiation that takes place in mediation occurs between the lawyers and the mediator, without the parties being present. Furthermore, she argues that "it is clear that [these] parties did not intend to be bound" until they signed a written agreement. We can find no authority that supports the proposition that settlements reached during mediation should receive special treatment or be analyzed differently from settlements reached in other settings. Therefore, we disagree with the trial court's holding in that respect.

Moreover, the issues raised by defendant are initially questions of fact about when the parties intended their agreement to become binding. In Britt v. Thorsen, 258 Or. 135, 137, 481 P.2d 352 (1971), the court faced a similar question of whether the parties intended an agreement to be effective immediately or only after the execution of a written agreement. The court explained:

" 'Where parties agree to reduce their agreement to writing, the question arises as to whether their negotiations constitute a contract. * * * [W]here all the substantial terms of a contract have been agreed on and there is nothing left for future settlement, the fact alone that it was the understanding that the contract should be formally drawn up and put in writing does not leave the transaction incomplete and without binding force, in the absence of a positive agreement that it should not be binding until so reduced to writing and formally executed. Where, however, the writing is regarded as a prerequisite to the closing of the contract, the agreement does not become binding if there has been a failure to reduce it to writing.' " 258 Or. at 137-38, 481 P.2d 352 (quoting Gen. Realty Corp. v. Douglas Lowell, Inc., 223 Or. 244, 253-54, 354 P.2d 306 (1960)). (Citations omitted.)

The objective manifestations of the parties as evidenced by their communications and acts control the resolution of this issue. Real Estate Loan Fund v. Hevner, 76 Or.App. 349, 354, 709 P.2d 727 (1985). The evidence indicates that the parties intended that the settlement become binding on the evening of August 18. Plaintiff's attorneys made it clear to Kaplan that defendant was required either to accept or to reject the proposed settlement that night even though she had requested several days within which to consider it. Defendant authorized Kaplan to accept the offer before she went to dinner, and Kaplan notified the mediator...