Buyer's remorse

In more than 30 years of practicing law, I have heard many attorneys say they do not need help negotiating contracts, agreements, or settlements of lawsuits.  I have also seen many contracts and agreements that are full of ambiguities or missing terms, which frequently lead to lawsuits.  Even when an agreement is not ambiguous or incomplete, a party who has “buyer’s remorse” often turns to the courts for help.

For example, in BV/B1, LLC v. Investors Bank, a real estate developer negotiated favorable terms on a loan from a bank.  In return, the bank inserted a fairly hefty prepayment penalty clause.  Sure enough, the developer got an offer to sell its building and property before the due date on the loan, triggering the prepayment penalty.  So the developer went to the bank and negotiated a reduction in the penalty in order to complete the sale, avoid litigation, and maintain a continuing relationship with the bank.  The developer paid off the loan and penalty out of the proceeds of the closing, but also sent a letter reserving its right to seek a refund of the penalty.  The developer quickly demanded its refund and the bank refused.  The developer sued.  (What happened to avoiding litigation and maintaining a good relationship with the bank?)

The trial court granted summary judgment to the bank, declaring not only that the bank did not have to refund the penalty, but that it was entitled to the balance of the original penalty.  The developer appealed, but the appellate court affirmed.  End result—the developer has to pay more than twice what it had negotiated for before filing its lawsuit.

Maybe the developer, or its attorneys, were good negotiators.  They just didn’t know when to leave well enough alone.  The bank and its attorneys were obviously also good negotiators.  And the courts appreciated that fact, refusing to relieve the parties of the benefits of their bargain.  The appellate court’s opinion refers to the parties’ “negotiations” and “agreement” (or variations thereof) more than a dozen times and finds no ambiguity. 

I don’t know whether the parties in this case considered mediation at any point, but a good mediator should help the parties appreciate the effect and importance of their negotiations and agreements, and avoid buyer’s remorse.  No matter how good the negotiators are, a settlement agreement that leads to litigation fails to achieve its purpose.  Dispute resolution means putting the dispute behind you, not kicking it down the road into court.