Court Rejects Settlement Order As An Enforceable Arbitration Agreement

In Knaresborough Enterprises, LTD v. Dizazzo, the Vermont Supreme Court addressed a circumstance described as follows by the court:

“In this property dispute between neighboring landowners, defendants appeal a provision in the trial court’s final order that requires the parties to submit future disagreements to binding arbitration. The court included the provision in the order based on plaintiff’s representation during the final hearing that the parties had orally agreed to such a provision. Defendants argue that this was error because they did not confirm plaintiff’s assertion and the parties did not sign a written agreement or acknowledgement of arbitration, as required by the Vermont Arbitration Act.“

Finding that the court’s entry of the order did not constitute a written agreement to arbitrate, the court also held that the defendants neither waived nor were estopped from invoking the Vermont Arbitration Act’s requirement that an arbitration agreement be in writing. According to the court:

“Here, defendants did not unequivocally agree on the record to the material terms of an arbitration agreement or to waive their statutory right to a written acknowledgement of
arbitration. At the April 2019 hearing, plaintiff’s counsel told the court simply that the parties had orally agreed to an arbitration provision and planned to work out the terms between themselves. Defendants did not respond, and arbitration was not mentioned again by either party or the court during the hearing. Defendants’ silence at the hearing was insufficient to demonstrate a knowing and voluntary waiver of the protections of [the Act]. And their subsequent actions similarly do not support a conclusion of waiver. Before the court issued its final order and afterward, defendants repeatedly objected to the inclusion of an arbitration provision on several different grounds, including failure to comply with [the Act].“

The takeaway: those wanting a settlement agreement to provide for arbitration of future disputes should be sure to either document the expectation in a written settlement agreement signed by the parties, or, at minimum, to agree upon specific language to be read into the record with both parties acknowledging the agreement on the record. Don’t treat the agreement to arbitrate casually.