August 2, 2015
This blog entry is a first in a series on the Settlement Agreement, the document by which the terms of settlement between Plaintiff and Defendant (or prospective parties to litigation) are memorialized.
All litigation ends in either a trial, a settlement, or the Plaintiff simply walking away from his claim.
Our advice to clients on settlement agreements is to obtain from the other party a full, complete and final release of all claims, known or unknown, from the beginning of time through the execution of the settlement document.
Why? Well, for several reasons.
- We have had litigation that had two parts. The Plaintiff pleaded with us to settle part #1, and allow him to proceed with part #2. We advised the client against doing this, as it would simply have allowed the plaintiff to finance the second part of the litigation with the proceeds from the first.
- Litigation is a bit of a game of chicken. Neither party knows which party will flinch first. If a Defendant writes a settlement check to resolve some of the Plaintiff’s claims, the Plaintiff then knows the Defendant’s threshold for conflict resolution, and they know that if they push just a little harder, they could get a second settlement.
- Finally, whether by design or surprise, a party can later learn of claims that already existed as of the execution of the first settlement agreement. By entering into a partial settlement agreement on earlier claims, it only encourages raising later-learned claims.
Now, it is always possible that claims from the Plaintiff could arise from occurrences arising entirely after the first settlement. These later-arising claims are generally not waive able at the time of the first settlement.
In order to obtain finality in a settlement agreement, here are some considerations:
- Be sure to get all parties who might have claims and all parties against whom claims might be made included in one settlement agreement. This may include all heirs and assigns, and in the case of claims against corporate entities, a release of all officers, employees, directors, and agents of the corporate entity. It is always a good idea to get a release of the attorney as well. If the claimant is a corporate entity, are there individuals who should be included in the release as well?
- Corporate releases and releases from fiduciaries should have the proper evidence of authority to enter into the agreement.
- Be sure to include all claims, whether presently known or unknown, and whether knowable or unknowable, at that the time the settlement agreement is struck. This also should include claims that may later arise from the conduct settled, such as a death arising from what is at the time of the settlement just a personal injury claim.
- If the claims of a minor are being settled, it may require a proceeding in Court to approve the settlement.
A settlement agreement is frequently quickly drafted from a form at the conclusion of litigation, but some careful thought is appropriate in formulating this important document. We generally do not recommend settling a claim, unless the entire claim is resolved with that document.