This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1998).




Paul Schwartz, et al.,



Robert Adamson,

d/b/a Robert Homes, Inc.,


Filed March 30, 1999


Amundson, Judge

Anoka County District Court

File No. C2-98-4517

Mark A. Greeman, 700 Lumber Exchange, Ten South Fifth Street, Minneapolis, MN 55402; and

Ruth Y. Ostrom, 270 North Grain Exchange, 301 Fourth Avenue South, Minneapolis, MN 55415 (for appellants)

James A. Reding, Jr., Reding & Pilney, 814 Degree of Honor Building, 325 Cedar Street, St. Paul, MN 55101 (for respondent)

Considered and decided by Crippen, Presiding Judge, Amundson, Judge, and Anderson, Judge.



Appellants challenge the district court's grant of summary judgment enforcing an oral mediation settlement agreement between the two parties. We reverse.


In 1995, the parties entered into purchase agreements for real property in Oak Brook Peninsula and the construction of a house on that property. After construction of the home was finished and the parties closed, appellants determined that Adamson failed to perform a number of his obligations, including the failure to construct their home in a workmanlike manner. They filed a complaint against Adamson on September 9, 1998. Adamson counterclaimed.

The parties agreed to mediation and during mediation agreed to a settlement, but Adamson's attorney was in a hurry to leave and the parties agreed to let the mediator draft an agreement for signatures the following day. During the mediation there was some discussion regarding the proper installation of the windows. The mediator said he listened in on a phone call to the Anderson Windows' representative who stated that flashing was not required for proper installation. After receiving this information, the group attempted to call Anderson Windows again, for confirmation that no flashing was required with installation, but the office was closed for the day.

If flashing were a requirement for proper installation, the windows would have to be reinstalled at considerable expense. Relying on the information provided by the mediator, and believing that they incorrectly understood that reinstallation was necessary, appellants agreed to a reduced amount for caulking and sealing the windows. But, before they signed the settlement agreement appellants spoke to a representative from Anderson Windows again and were told that flashing was required with the installation of their windows. Based on this information, appellants refused to sign the settlement agreement unless Adamson was willing to reinstall the windows. Adamson moved for and received summary judgment enforcing the mediated settlement agreement. This appeal followed.


We review de novo a grant of summary judgment to determine whether there are any genuine issues of material fact and whether the district court correctly applied the law. Zip Sort, Inc. v. Commissioner of Revenue, 567 N.W.2d 34, 37 (Minn. 1997). This case raises issues of statute and contract interpretation, which are questions of law subject to de novo review. Hertz Corp., v. State Farm Mut. Ins. Co., 573 N.W.2d 686, 688 (Minn. 1998).


On April 20, 1998, the parties signed an agreement to mediate. This agreement fully incorporates the Minnesota Civil Mediation Act, found at Minn. Stat. §§ 572.31-.40 (1998), by stating that mediation is a voluntary process and that the parties intend for the mediation process to comply with the Act. Additionally, the parties waived section 572.33(3), which requires a written agreement identifying the controversy between the parties and provides for termination of the mediation upon written notice from either party. The relevant part of the Act states:

The effect of a mediated settlement agreement shall be determined under principles of law applicable to contract. A mediated settlement agreement is not binding unless it contains a provision stating that it is binding and a provision stating substantially that the parties were advised in writing that * * * (b) signing a mediated settlement agreement may adversely affect their legal rights * * *.

Minn. Stat. § 572.35 subd. 1.[1]

The language in Minn. Stat. § 572.35 (1996) was interpreted by the Minnesota Supreme Court in Haghighi v. Russian-American Broad. Co., 577 N.W.2d 927 (Minn. 1998). In Haghighi, the court decided that a handwritten document prepared by the parties at the conclusion of a mediation session was unenforceable as a mediated settlement agreement because it failed to state that the document was binding. Id. at 930.

The parties agree there is no clause in the unsigned mediated settlement agreement stating that the document was binding. Neither party signed the agreement.

It is well settled that no contract exists where two parties consider the details of a proposed agreement, perhaps settling them one by one, with the understanding during this process that the agreement is to be embodied in a formal written document and that neither party is to be bound until he executes the document.

Hansen v. Phillips Beverage Co., 487 N.W.2d 925, 927 (Minn. App. 1992) (citations omitted). While Hansen discussed whether an enforceable contract existed based upon a signed letter of intent, it is nevertheless instructive. Id. at 925. The execution of the document is a key component to binding the parties; the statement requires not only that the document be in writing but also that neither party is bound until he executes the document. Id. at 927.

It appears that the district court erred in granting summary judgment enforcing a mediated settlement agreement that was (1) never signed and (2) contrary to the Minnesota Supreme Court's holding in Haghighi.

But, Adamson argues that there was an oral agreement that should be enforced under the principles of contract law. Adamson suggests that the written mediated settlement agreement, prepared by the mediator the day after the actual mediation, is the enforceable oral agreement. It is illogical to argue that even if a written agreement is not enforceable, the oral agreement on which the written agreement was based is enforceable.

Furthermore, Adamson incorrectly relies on Haghighi v. Russian-American Broadcasting Co., 945 F. Supp. 1233 (D. Minn. 1998), which was appealed to the Eighth Circuit, because the Eighth Circuit certified the question to the Minnesota Supreme Court where it was reversed. See Haghighi, 577 N.W.2d at 930 (deciding the certified question and holding that to be in compliance with the Mediation Act all the necessary language must be incorporated into the document or it is not binding). Therefore, Adamson's arguments are without merit.


Finally, the district court awarded Adamson fees in the amount of $750, "as and for the bringing of the motion of July 1, 1998." Attorney fees may be awarded upon a finding that a party presented documents for an improper purpose, asserted a claim that was unwarranted by existing law, or asserted allegations and other factual contentions that do not have evidentiary support. Minn. Stat. § 549.211 (1998). An award of costs and disbursements is collateral to a judgment on the merits. Seiberlich v. Burlington N. R. R. Co., 447 N.W.2d 896, 899 (Minn. App. 1989), review denied (Minn. Jan. 12, 1990). But the award of bad-faith attorney fees is distinctly different from the award of statutory costs and disbursements. Kellar v. Von Holtum, 583 N.W.2d 761, 765, (Minn. App. 1998). Unlike bad-faith attorney fees awarded under Rule 11 or Minn. Stat. § 549.211, statutory costs and disbursements "are reimbursement of the expense of litigating the claim." Id., at 765 (citations omitted). Simply put, costs and disbursements may be awarded to the prevailing party. Id.; see also Borchert v. Maloney, 581 N.W.2d 838, 839 (Minn. 1998).

We conclude, the $750 judgment should also be reversed because (1) there is no explanation for the $750 award, (2) there is no perceptible reason to grant bad-faith attorney fees, and (3) Adamson is not the prevailing party.


[1] It should be noted that Minn. Stat. § 572.35, subd. 1, was changed in 1998 as quoted above , but, the change is not substantive.