Parties who resolve a case through a mediation conducted under Court of Chancery Rule 174 should include all material provisions in any mediation term sheet. As the Order in Starkman demonstrates, Rule 174 provides no opportunity for a party to introduce mediation communications to assert that a signed mediation agreement does not accurately reflect the parties’ discussions.

Starkman involved claims and counterclaims related to a limited liability company. Following Rule 174 mediation, the parties agreed to settlement terms, which they reduced to a Settlement Term Sheet. The Term Sheet purported to state the “terms” upon which the parties “agree[d] to settle” and that it was “binding … pending the execution of a formal settlement agreement.” (Order ¶¶ 2-3). But in the course of drafting that formal settlement agreement, the parties disagreed whether the company had an obligation to submit corrective tax filings. The defendant (who would have benefited from the filings) asserted that the corrective filings were part of the agreement, even though the term sheet did not expressly mention the filings.

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