Hocus pocus! An enforceable settlement agreement

Hocus pocus! An enforceable settlement agreement

MCDHOPO EC003The legal system sometimes requires the use of “magic words” before things can happen. For instance, depending on its language, a court may decide a settlement agreement is a frog or a prince. The correct magic spell requires the correct language. Before you bring that settlement agreement to the wizard/judge, make sure it’s done right.

Some of those magic words include the signatures of the parties. It’s critical to get both sides to sign the settlement document or it may not be enforceable under Code of Civil Procedure 664.6. Under that section,

  • If the parties stipulate to a settlement in writing (or orally before the court),
  • A party can move to enforce the agreement, and,
  • If the parties request it, the court may retain jurisdiction until there is full performance of the settlement’s terms.

To be enforced by a court, an out-of-court written settlement agreement must be signed by all the parties, not just their attorneys and not just the party against whom enforcement is sought.  Levy v. Superior Court (1995) 10 Cal.4th 578.

An exception occurs when the defendant is insured under a policy that allows the insurance company to settle without the defendant’s consent. In that case, the defendant’s signature is not necessary, but the adjuster’s is necessary. Fiege v. Cooke (2004) 125 Cal.App.4th 1350, 1353-1355; Robertson v. Chen (1996) 44 Cal.App.4th 1290, 1295-1296.

This can be a major problem for settlement documents that are one sided only. For example, many releases only require the plaintiff to sign the release. If that is the case, it would not be enforceable under CCP 664.6. This does not mean that it is not enforceable, but instead, the expedited procedure of 664.6 will not be available.

To be enforceable under §664.6, the material terms of the settlement must be explicitly defined in the agreement. A settlement agreement is unenforceable if the parties fail to agree on a material term (such as the terms of payment) or if a material term is not reasonably certain (like leaving that up to arbitration). Minor unresolved issues should not make a settlement agreement unenforceable.

When the agreement is reached during mediation it makes the situation a little more complicated but not impossible. There is a “mediation privilege” which normally precludes introduction into evidence anything said or written in the course of a mediation proceeding. (Cal. Evid. Code § 1119.)

A key component of mediation is that everything said or written or settlement offers proposed are confidential (this encourages the parties to speak freely and openly discuss a possible resolution). But problems can arise when a settlement agreement comes within the mediation privilege. Disclosure of a settlement agreement is prohibited unless the situation falls into a specific statutory exception.

Section 1123 of the Evidence Code provides an exception to mediation confidentiality, allowing mediated settlements to be introduced into evidence in a judicial proceeding.

Any waiver of the mediation privilege will be strictly construed and a waiver will not be implied. To get around this privilege, the settlement agreement must contain express language. The settlement agreement must spell out that it’s:

  • Admissible or subject to disclosure,  and
  • Enforceable or binding.

The agreement is also admissible if all parties expressly agree in writing, or orally in accordance with section 1118, to disclose the agreement. (See Cal. Evid. Code § 1123 (a), (b), and (c).)

Whatever the wording, the settlement agreement must unambiguously and directly express the parties’ intent to be bound by the agreement and permit disclosure of the agreement in a court of law.

Do yourself and your client a favor by making sure any proposed settlement agreement is properly worded. If you don’t draft it correctly and it turns out to be unenforceable, you may wish you could make yourself magically disappear.

 

 

By |2014-03-08T12:33:04-07:00March 8th, 2014|arbitration, mediation, Settlement Issues, Uncategorized|Comments Off on Hocus pocus! An enforceable settlement agreement