Settlement Fundamentals and Tactics (CA) PDF

User Name: [email protected] Date and Time: Monday, July 15, 2024 10:20:00AM PDT Job Number: 228853911 Document (1) 1. Settlement Fundamentals and Tactics (CA) Client/Matter: -None- | About LexisNexis | Privacy Policy | Terms & Conditions | Copyright © 2024 LexisNe...

User Name: [email protected] Date and Time: Monday, July 15, 2024 10:20:00AM PDT Job Number: 228853911 Document (1) 1. Settlement Fundamentals and Tactics (CA) Client/Matter: -None- | About LexisNexis | Privacy Policy | Terms & Conditions | Copyright © 2024 LexisNexis  Settlement Fundamentals and Tactics (CA) Go to: Pre-suit Settlements | Settling after Complaint Is Filed | Settling after Entry of Judgment | Settling Specific Claims | Partial Settlements | Related Content Maintained by Jim Wagstaffe and The Wagstaffe Group This practice note discusses how to negotiate and finalize a settlement in California litigation and covers topics such as pre-suit settlements, settling after a complaint is filed and after entry of judgment, releases and interpreting them, overbroad and standard terms in a release, confidentiality issues, oral settlements, judicial settlement conferences, partial settlements, and class action settlements. For a full listing of key content covering fundamental civil litigation tasks throughout a California court litigation lifecycle, see Civil Litigation Fundamentals Resource Kit (CA). Because very few cases proceed to trial, many disputes end with the parties entering into a settlement agreement. Therefore, parties' object is to be familiar with the procedures for finalizing settlements, whether they are reached before a lawsuit is initiated or after one has begun. Parties must also be strategic about determining whether and how to enforce a settlement agreement and oppose an effort to enforce a settlement. For a related checklist, see Settlement Fundamentals Checklist (CA). For a related form, see Settlement Agreement and Release (CA) Video: Settlements in California Pre-suit Settlements Settlements reached before the complaint is filed are formalized by a release. A release is simply a contract by which a claimant discharges the person against whom the claim is made from any liability arising out of the incident. Ordinarily, the release is prepared by defense counsel or defendant's insurance carrier. It may be accompanied either by a draft (i.e., payment) for the agreed-on amount, or a letter stating that a draft for the agreed-on amount will be provided on plaintiff's return of the executed release. Plaintiff's Concerns: Overbroad Provisions in Release  Page 2 of 8 Settlement Fundamentals and Tactics (CA) If representing a plaintiff, review the release carefully for provisions that are unnecessarily broad. The release may state that the plaintiff surrenders all claims against the payors "and all other persons." Such language could preclude the plaintiff from proceeding against later- discovered responsible parties or against the defendant's insurer. A release of "any and all claims," if not limited to the specific claim being settled, raises an issue as to which claims are released. Jefferson v. Dep't of Youth Auth., 28 Cal. 4th 299, 305 (2002) ("courts have continued to adhere to the long-established general rule that--in the absence of fraud, deception, or similar abuse--a release of 'all claims' covers claims that are not expressly enumerated in the release." (citations omitted); but see Cal. Civ. Code § 1542 ("A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party."). You should check for language in the release that obligates the plaintiff to "indemnify and hold defendant harmless" against all "valid and invalid" claims by third parties. This language exposes the plaintiff to unnecessary risk of expense and loss from third-party lawsuits against the defendant and should not be signed. Additionally, use caution when signing an "agreement as to form." Make clear whether you, as the attorney, intend to be bound by the terms of the settlement, such as the confidentiality provisions. See Monster Energy Co. v. Schechter, 7 Cal. 5th 781, 795 (2019). Defendant's Concerns with Overbreadth and Confidentiality Issues Often, the plaintiff will negotiate for a mutual release, which will raise concerns for the defendant similar to those of the plaintiff, including ambiguity over the persons to whom the release applies, the scope of the release, and any overbroad indemnification provision. The defendant may want to keep the terms of the release confidential. Be aware that the plaintiff may not treat such a request as a formality or a "standard" term. If representing the defendant, you may want to raise the issue during the negotiations and should keep in mind that, if court approval is required to finalize the release, the court may not separately order that the settlement be kept confidential unless the parties mutually agree to do so. Problems with "Standard" Terms Both sides should watch out for "standard terms" the parties presume will be included in the written agreement after reaching an oral settlement, such as an integration clause, which allows the parties to sign the agreement in counterparts. Care should be taken with terms such as confidentiality, governing law, enforceability, and dispute resolution methods. These provisions may lead to issues down the road if they are not negotiated at the time of the settlement discussions. Parties should negotiate whether the agreement will contain an attorney's fees clause providing for fees in the event of a later breach of the agreement. Such a provision is not to be presumed, and its scope and content can be highly debatable. Discuss an attorney's fee provision before concluding any oral recitation of a settlement.  Page 3 of 8 Settlement Fundamentals and Tactics (CA) Interpreting a Release A release normally discharges only the settling defendant unless its terms provide otherwise. However, a settlement and release may reduce the claims against other defendants in tort cases and may lead to defenses regarding double recovery. The binding effect of a general release (e.g., of "all claims or causes of action, known or unknown") is limited where the releasor was fraudulently induced to issue an overbroad release. Frusetta v. Hauben, 217 Cal. App. 3d 551, 557 (1990) ("It has often been held that if the releaser was under a misapprehension, not due to his own neglect, as to the nature and scope of the release, and if this misapprehension was induced by the misconduct of the releasee, then the release, regardless of how comprehensively worded, is binding only to the extent actually intended by the releaser.") (emphasis in original). Settling after Complaint Is Filed Attorneys must be authorized to settle; attorneys have no authority to settle cases solely by virtue of their general power to handle the case or based on a term in the attorney's fee agreement. Cal. Rules. Prof. Conduct, Rule 1.2(a); Amjadi v. Brown, 68 Cal. App. 5th 383, 389 (2021). Instead, an attorney can only enter a binding compromise if the client has authorized the attorney to do so. Blanton v. Womancare, Inc., 38 Cal. 3d 396, 404 (1985) ("an attorney must be specifically authorized to settle and compromise a claim, that merely on the basis of his employment he has no implied or ostensible authority to bind his client to a compromise settlement of pending litigation"); see Cal. Code Civ. Proc. § 664.6(d). An attorney's authority to settle cannot be created by the attorney's own representations, and any settlement is valid only on "a finding of actual consent or ratification." See Lazarus v. Titmus, 64 Cal. App. 4th 1242, 1249 (1998). Liability insurance policies generally authorize the insurer to settle claims against the insured without the insured's consent. In such cases, the insurer owes a duty of good faith and fair dealing, and therefore cannot enter into settlements that are inconsistent with the reasonable expectations of the insured. Barney v. Aetna Cas. & Sur. Co., 185 Cal. App. 3d 966, 976-–77 (1986) (permitting claim where insurer entered into settlement "whereby the insured's right to counterclaim was exchanged, without her knowledge and consent, for a $600 limit in liability"). Duty to Notify the Court Counsel must notify the court expeditiously when a case is settled. If an entire case is settled or otherwise disposed of, each plaintiff or other party seeking affirmative relief must immediately file written notice of the settlement or other disposition with the court and serve the notice on all parties and any arbitrator or other court-connected alternative dispute resolution (ADR) neutral involved in the case. Each plaintiff or other party seeking affirmative relief must also immediately give oral notice to all of the above if a hearing, conference, or trial is scheduled to take place within 10 days. Cal. Rules of Ct., Rule 3.1385(a)(1). The Judicial Council has created mandatory form CM-200 (Notice of Settlement of Entire Case) to be used to notify the court when an entire  Page 4 of 8 Settlement Fundamentals and Tactics (CA) case is settled, either conditionally or unconditionally. A copy of the form may downloaded from the California Courts website. If the settlement is not conditional, each plaintiff or other party seeking affirmative relief must serve and file a request for dismissal (see discussion below under "Finalizing Settlement") of the entire case within 45 days after the date of settlement of the case. If the plaintiff or other party required to serve and file the request for dismissal does not do so, the court must dismiss the entire case 45 days after it receives notice of settlement unless good cause is shown why the case should not be dismissed. Cal. Rules of Ct., Rule 3.1385(b). Many courts will issue an order to show cause why the case should not be dismissed, either preemptively to set a hearing for that deadline or shortly after the deadline is missed. If the settlement agreement conditions dismissal of the entire case on the satisfactory completion of specified terms that are not to be performed within 45 days of the date of settlement (e.g., payment of the settlement amount in installments), the party filing Form CM- 200 must specify the date by which performance will be completed and the request for dismissal will be filed. See Cal. Rules of Ct., Rule 3.1385(c)(1). In the interim period, all hearings and other proceedings requiring the appearance of a party are vacated, except a hearing on an order to show cause or other proceeding relating to sanctions, or for determination of good faith settlement at the request of a party under Cal. Code Civ. Proc. § 877.6. Cal. Rules of Ct., Rule 3.1385(c)(3). If additional time is required between settlement and dismissal, the party seeking that additional time must serve and file a notice and a supporting declaration advising the court of that party's inability to dismiss the case within the prescribed time, showing good cause for its inability to do so, and proposing an alternative date for dismissal. The notice and a supporting declaration must be served and filed at least five court days before the time for requesting dismissal has elapsed. Cal. Rules of Ct., Rule 3.1385(e). If the settlement of the case involves the compromise of the claim of a minor or person with a disability, the court must not hold an order to show cause hearing under Cal. Rules of Ct., Rule 3.1385(b) before the court has held a hearing to approve the settlement, provided the parties have filed appropriate papers to seek court approval of the settlement. Cal. Rules of Ct., Rule 3.1385(d). Finalizing the Settlement A release is a routine part of a settlement, and you should evaluate the potential issues with releases identified above any time a party considers settling. See also Settlement Fundamentals Checklist (CA). In addition, consider the legality of each term and whether the court should retain jurisdiction over the action. Ensure Obligations Are Legal Counsel must vet language in any proposed settlement for possible legal violations. For example, the court will not enforce an unreasonable liquidated damage provision that functions as a penalty, so including such a term has no value. See, e.g., Cal. Civ. Code § 1671; Red &  Page 5 of 8 Settlement Fundamentals and Tactics (CA) White Distrib., LLC v. Osteroid Enters., LLC, 38 Cal. App. 5th 582, 589 (2019). Additionally, certain confidentiality provisions are prohibited. See, e.g., Cal. Code Civ. Proc. §§ 1001–1002. Moreover, settlements are agreements, and as such, their content may open parties to liability for violation of applicable laws. See, e.g., In re Cipro Cases I & II, 61 Cal. 4th 116, 162–63 (2015) (settlement agreement constituted illegal restraint of trade under Cartwright Act, Cal. Bus. & Prof. Code § 16700 et seq., by establishing consensual monopoly). Request for Court to Retain Jurisdiction The court may, if requested by the parties before dismissal of the suit, retain jurisdiction over the parties to enforce the settlement until performance in full of the settlement's terms. Cal. Code Civ. Proc. § 664.6. The parties—not their attorneys or agents—must make the request orally before the court or in a signed writing. Mesa RHF Partners, L.P. v. City of Los Angeles, 33 Cal. App. 5th 913, 918 (2019); Wackeen v. Malis, 97 Cal. App. 4th 429, 433 (2002). Request for Dismissal Settlements reached outside court are usually implemented by a notice of dismissal signed by the plaintiff. See Cal. Code. Civ. Proc. § 581(b)(1), (2), (c). The Judicial Council has created mandatory form CIV-110 (Request for Dismissal) to be used for this purpose. A copy of the form may be downloaded from the California Courts website. If a cross-complaint is pending, the defendant must sign the appropriate section of form CIV-110 to provide its consent to the dismissal. See Cal. Code. Civ. Proc. § 581(i), (j). Be sure that any party's entitlement to attorney's fees is resolved before the settlement is finalized and the dismissal filed. See, e.g., Hom v. Petrou, 67 Cal. App. 5th 459, 465 (2021). For additional discussion of procedures for voluntary dismissal of actions, see Voluntary Dismissal (CA). Oral Settlement Agreement California courts may only enter judgment on a settlement where "parties to pending litigation stipulate, in a writing signed by the parties outside the presence of the court or orally before the court, for settlement of the case, or part thereof." Cal. Code Civ. Proc. § 664.6. You should therefore not rely on oral settlement agreements reached outside the presence of the court, but instead reduce all such agreements to a writing. Settling at a Judicial Settlement Conference When settlement is reached at a court settlement conference, the judge will often cause the agreement to be put on the record—that is, the terms will be stated in open court, and taken down by a court reporter, or entered in the minutes, or both. An on-the-record settlement agreement serves a number of purposes: It provides a record of the exact terms of the agreement.  Page 6 of 8 Settlement Fundamentals and Tactics (CA) It assures that all settling parties actually heard and consented to the same settlement terms. It provides a basis for enforcement of the settlement, if necessary. It satisfies the requirements of Cal. Code Civ. Proc. § 664.6 (requirements for entry of judgment pursuant to settlement). The typical procedure for on-the-record settlements is as follows: The judge will take the bench and note the presence of the attorneys and the parties (or a representative of the insurance carrier as to parties defended by an insurance carrier). One of the attorneys will then be asked to state the terms of the settlement (usually the payment of a certain sum of money in exchange for a dismissal with prejudice, a release, and a mutual waiver of costs). Opposing counsel will be asked to confirm that the settlement, as stated, accurately embodies the agreement. The judge may then question the parties, asking whether they: ○ Understand the settlement terms ○ Have any questions for their attorneys ○ Understand that the settlement puts an end to their claims and that they may not later reopen the case or sue again –and– ○ Accept the settlement as stated The judge may (or may not) proceed to enter a judgment of dismissal based on the proceedings in court. Alternatively, the judge may render a conditional dismissal and set a time within which the parties are to execute whatever documents are required to memorialize their in-court agreement. The in-court settlement is generally binding even though it is contemplated that the terms will thereafter be reduced to a signed writing. If a party refuses to sign the written memorial of the oral settlement, the remedy is a motion to enforce the settlement. Settling after Entry of Judgment When the parties settle after judgment is entered, they may attempt to have the judgment vacated or set aside (so-called "vacatur"). This can only be done where both of the following are true: There is no reasonable possibility that the interests of nonparties or the public will be adversely affected by the reversal. The reasons of the parties for requesting reversal outweigh the erosion of public trust that may result from the nullification of a judgment and the risk that the availability of stipulated reversal will reduce the incentive for pretrial settlement.  Page 7 of 8 Settlement Fundamentals and Tactics (CA) Cal. Code Civ. Proc. § 128(a)(8); Hardisty v. Hinton & Alfert, 124 Cal. App. 4th 999, 1005 (2004) (holding this language "creates a presumption against stipulated reversals"). Settling Specific Claims In addition to general procedures for effectuating settlement, counsel should determine whether special procedures are required to effectuate settlement of a particular type of claim. Unrepresented Minors and Incompetent Persons If "a minor, a person who lacks legal capacity to make decisions, or a person for whom a conservator has been appointed is a party, that person shall appear either by a guardian or conservator of the estate or by a guardian ad litem appointed by the court in which the action or proceeding is pending, or by a judge thereof, in each case." Cal. Code Civ. Proc. § 372; see discussion in Parties, Capacity, and Standing (CA). Settlements involving minors or persons with disabilities are subject to court approval. That approval is sought via petition. See Cal. Rules of Ct., Rules 3.1384(a), 7.950 et seq. Class Actions Settlement of a class action must be approved by the court and, after notice is given to all potential class members, the settlement is reviewed again at a fairness hearing. See Cal. Rules of Ct., Rule 3.769. For detailed discussion, see CA Pretrial Civil Procedure: The Wagstaffe Group § 37-IX. Partial Settlements Usually, when a judgment is rendered against one of several joint tortfeasors, that entity may seek to hold other tortfeasors liable for their fair share of the judgment on principles of contribution and indemnity. However, when a plaintiff has already settled with one or more of these tortfeasors, an issue arises over whether this settlement bars contribution claims, because the settling tortfeasor has, at least theoretically, already paid some share of the liability. To resolve this issue, California law requires that whenever "it is alleged that two or more parties are joint tortfeasors or co-obligors on a contract debt," the non-settling parties are entitled to "a hearing on the issue of the good faith of a settlement entered into by the plaintiff or other claimant and one or more alleged tortfeasors or co-obligors." Cal. Code Civ. Proc. § 877.6(a)(1). If the court finds the settlement was made in good faith, that ruling "shall bar any other joint tortfeasor or co-obligor from any further claims against the settling tortfeasor or co-obligor for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault." Cal. Code Civ. Proc. § 877.6(c). For detailed discussion, see CA Pretrial Civil Procedure: The Wagstaffe Group § 57-IV. Related Content  Page 8 of 8 Settlement Fundamentals and Tactics (CA) Resources Kits Civil Litigation Fundamentals Resource Kit (CA) Practice Notes Statutory Offer of Judgment: Making and Responding to the Offer (CA) Voluntary Dismissal (CA) Templates Settlement Agreement and Release (CA) Statutory Offer of Judgment (CA) Stipulation (CA) Checklists Settlement Fundamentals Checklist (CA) Current as of: 01/19/2024 End of Document