Ensuring the Enforceability of Settlement Agreements
by: Jennifer Duggan and Jennifer Plescia
When one or both parties refuse to abide by the terms of a settlement agreement, the party seeking an expeditious resolution may request the court to enforce the terms pursuant to section Civil Code of Procedure section 664.6. The enforceability of settlement agreements under section 664.6 rests on the inclusionof all material terms, an unambiguous intention to be bound, and the signature of the parties.
CCP section 664.6 provides statutory authorization for the entry of judgment on a stipulated settlement by means of a noticed motion. The antecedent to invoking section 664.6 is the requirement that the parties to the litigation stipulated to a valid and binding settlement agreement either "orally before the court" or "in a writing signed by the parties outside the presence of the court." If there is any lingering concern that the opposing party will fail to abide by the terms of the agreement, upon request, the court may retain jurisdiction over the parties until full performance of the terms of the agreement are rendered.
There is a conservative trend in California courts favoring a strict interpretation and enforcement of written settlement agreements pursuant to section 664.6. When memorializing the settlement in a final writing, it is important to consider basic contract principles and ensure the following is reflected in the written agreement.
The Settlement Agreement Contains All Material Terms
Courts will evaluate the agreement based on whether there was a meeting of the minds between the parties, and whether the material terms are reflected in the settlement agreement. In Gauss v. GAF Corp., 103 Cal. App. 4th 1110 (2002), the parties failed to include among other things the financial obligations of GAF to fund the settlement agreement. The Gauss court ultimately held that the trial court had no writing specifying material terms of the settlements to be imposed on GAF and it erred in entering judgments for the plaintiffs pursuant to section 664.6. Courts will generally decline to impose additional terms to settlement agreements thereby basing interpretation and enforcement solely on terms existing at the time of agreement. Weddington Productions, Inc. v. Flick, 60 Cal. App. 4th 793 (1998). To ensure enforceability when entering into a settlement one should expressly state material terms, and err on the side of being over inclusive.
The Settlement Agreement Reflects the Parties Unambiguous Intent to be Bound
Parties should avoid making general statements like "this agreement is enforceable." Rather, specific references to section 664.6 will better ensure judicial enforceability. "This agreement is final, binding, and enforceable under CCP Section 664.6" is a good example of enforceable language. Conservatorship of McElroy, 104 Cal.App.4th 536 (2002) held that head nods or movements in open court assenting to whether an agreement had been reached are too ambiguous to demonstrate assent and produces the type of litigation section 664.6 was designed to expressly avoid. In that regard, "agreements to agree" are unenforceable because they inevitably lack material terms and an unambiguous intent to be bound. It is impossible for the law to affix any obligation to a mere promise. Weddington Productions, Inc. v. Flick, supra, 60 Cal. App. 4th at 817. To ensure enforceability of the agreement each individual party must express an unambiguous intent to be bound either orally in open court or in a signed writing outside the presence of the court.
The Settlement Agreement is Signed by the Parties, Not the Attorneys of Record
The California Supreme Court has construed "parties" to mean the litigants themselves - "the specific person or entity by or against whom the legal proceedings are brought." Levy v. Superior Court of Los Angeles County, 10 Cal. 4th 578, 586 (1995). The Levy court declined to enforce a settlement agreement which was signed only by the party's attorney. A signature obtained after the time of execution is likely not enforceable. To ensure enforceability of a settlement agreement, have every litigant sign the agreement.
Settlement agreements reached during mediation present a unique tension between section 664.6 and California Evidence Code section 1119. One of the cornerstones of settlement discussions during mediation is the privilege of confidentiality under section 1119. The confidentiality privilege is in conflict with admitting settlement agreements in court to enforce the terms of the agreement. A settlement agreement reached during mediation should include language that unequivocally states both the agreement is enforceable, binding, and is admissible or subject to disclosure in open court. (A consequence of not including a confidentiality waiver will likely leave the parties with an inadmissible settlement agreement.) If you want to ensure admissibility of settlement agreements reached during mediation, you must include a waiver in the terms of the signed agreement. However, some parties and even mediators will balk at the inclusion of this waiver.
For more information regarding enforcing settlement agreements contact your legal counsel.