Settlement in big ticket litigation is extremely common. Nationally, about 95% of civil cases settle before going to trial. There are a number of benefits of settling a case, including eliminating the uncertainty of a result presented by trial on the merits, the expense of litigation, and preservation of resources of the judiciary system. The demands of the business world require settlement agreements to be written securely, with no ambiguity or opportunity to misinterpret. Many issues can arise from a poorly drafted settlement agreement, or a breached settlement agreement. Writing an enforceable settlement agreement takes skill, patience, and a high attention to detail. This blog will address Florida’s take on how settlement agreements are enforced after breach and actions to take to avoid drafting a less than air tight document. See Eisenberg, What is the Settlement Rate and Why Should We Care? Cornell Law Faculty Publication.
What does an Enforceable Settlement Agreement Look Like?
In Florida, an enforceable settlement agreement arises when the terms of the agreement are sufficiently specific and agreed upon. A settlement that defers agreement on material terms to a subsequent agreement is no agreement at all. However, “[u]ncertainty as to nonessential and ancillary terms will not preclude enforcement of a settlement agreement.” Carpaneda v. Quayside Place Partners, LLP, No. 09-20740 at *1 (S.D. Fla. July 7, 2010). The material terms need to be identified and agreed to at the very beginning of settlement. Whether a certain term is material depends on the facts and issues in dispute. The key to writing an enforceable settlement agreement is a critical understanding of what issues are material to the parties’ dispute and then negotiating a mutually satisfactory compromise of those material issues. According to Black’s Law Dictionary, a term is material if it is “significant to the issue or matter at hand.” Essentially, if the agreement identifies the “who, what, when, where, and why,” this should be sufficient to constitute an enforceable agreement.
After the initial offer of settlement, the opposing party must accept the settlement. If the opposing party’s acceptance adds or modifies terms of the initial offer, then there is no meeting of the minds. If no meeting of the minds has been reached on material terms of an agreement, then there has not been the creation of an enforceable agreement.
In Carpaneda, after mediation on a wage claim, the parties handwrote a document titled “Mediation Settlement Agreement.” Carpaneda No. 09-20740 at *1. In the document, the defendant agreed to an amount of payment to resolve all claims, the parties agreed to bear their own costs, and the plaintiffs agreed to execute general releases. Id. The plaintiffs further agreed to dismiss the claim within 14 days of the court’s approval of the agreement. Id. Subsequently, counsel could not agree on additional, ancillary terms and the defendant stated that an agreement had not been reached. Id. The plaintiff filed a motion to compel enforcement. Id. The court held that this document was enforceable. Id. The document contained essential terms that were sufficiently specific and mutually agreed upon. Id. The terms upon which the parties cannot agree were “mere contingencies;” and were not essential to reaching the settlement drafted at mediation. Id. The court went on to approve the settlement (required in order to settle a Fair Labor Standards Act dispute), and reserved jurisdiction to enforce the agreement in a later dispute over breach of specific terms. See Carpaneda, No. 09-20740 at *1.
Pitfalls to Avoid When Drafting Settlement Agreements
There are a number of issues that an attorney must avoid in order to draft the best possible settlement agreement for his or her client. The following is a survey of some of the most important pitfalls that arise in drafting agreements.
One of the biggest areas of concern when drafting a settlement agreement as an attorney is that there may be a short window of time to get a signed deal. This lack of time may result in a number of different problems. First, make sure that the acceptance “mirrors” the offer, meaning that the acceptance does not modify the original terms of the offer. If the acceptance does not mirror the offer, there is no “meeting of the minds,” and there is no enforceable agreement. Another issue to beware of is an ambiguous release of all claims. Be sure to resolve all disputes, and obtain a valid, unambiguous general release for your client that resolves all claims now and forever. This ensures that your client will never have to face the same lawsuit again or a suit from a related party. Next, be sure to provide for dismissal of the litigation after payment of the agreed upon settlement amount1 and attach the proposed order as an exhibit. Lastly, beware of transforming a claim that would otherwise be non-dischargeable in bankruptcy, into a dischargeable claim for money damages. See Litigation Settlement Agreement and Mediation Agreement Issues 2013, Ehrlich Litigation Seminar, November 5, 2013.
Another pitfall that is critical in avoiding when drafting a settlement agreement is to make sure that you, as the attorney, have your client’s grant of authority to settle. The party that seeks to enforce the agreement later will have the burden to prove that there was a clear and unequivocal grant by the client of the attorney’s authority to settle. Ponce v. U-Haul Co., 979 So. 2d 380, 382 (Fla. 4th DCA 2008). An unauthorized settlement executed by an attorney has no effect and may be ignored and treated as a nullity, unless the client subsequently ratifies the settlement. An attorney’s good faith belief that the attorney had authority to settle is insufficient. Cibula v. Ross, 597 So. 2d 915 (Fla. 4th DCA 1992). An exception to this general rule is in the situation where the attorney is confronted with an emergency that requires prompt action to protect his or her client’s interest and consultation with the client is impossible.
Further, beware that oral agreements to settle litigation that fall outside the statute of frauds2 are enforceable. Silva v. Silva, 467 So. 2d 1065 (Fla. 3d DCA 1985). In Florida, an oral agreement that is properly entered into the record in open court, where there is clear understanding of the finality of that agreement, is effective and enforceable, regardless of whether it is subsequently reduced to a written agreement. See id.3 Consequently, when a settlement is announced and accepted in open court, a court is free to enforce such settlement notwithstanding the fact that one party later objects to the agreement and refuses to sign it. An oral agreement to settle in any form, but especially in court, may create significant ambiguities and problems for enforcement. If you are forced to make an agreement on record, make sure that the essential terms of settlement are written down, reviewed by your client, and understood by your client so those terms can be read into the record. Also, attach your writing to the final order. If you do not have a writing prepared, take a recess and write it down. If opposing counsel attempts to interject terms different than those previously prepared, deny there is any settlement on the record. See Litigation Settlement Agreement and Mediation Agreement Issues 2013, Ehrlich Litigation Seminar, November 5, 2013.
Also, making an oral agreement in a deposition to be taken down by a court reporter is generally not a good idea; you do not know exactly what your client will say or what the court reporter will write down. If some settlement discussion arises, be sure to make clear that there is no agreement and a written agreement with all terms needs to be signed. Also, beware of opposing counsel’s attempts to discuss settlement and agreements on record. See Id.
A settlement agreement made in mediation must be signed by all parties appearing at mediation to be enforceable. City of Delray Beach v. Keiser, 699 So. 2d 855 (Fla. 4th DCA 1997). Normally, one party is not physically present, usually appearing by telephone, and must sign and send by fax or email. Be certain that the agreement has a provision for allowing signatures by fax or email, and for signatures in counterparts. Do not end the mediation until everyone signs. If for some reason someone leaves without signing, do not cancel the trial or hearing until all signatures are obtained.
In sum, there are a number of different pitfalls that can create serious issues in drafting a settlement agreement. This is just a survey of the most common pitfalls of which an attorney should beware. Be aware of the key pitfalls outlined in this blog before drafting a settlement agreement for your client.
How is a Settlement Agreement Enforced in Florida Courts?
Once a resolution to the parties’ dispute has been reached, parties normally employ one of four options to either halt or end their litigation: (1) the plaintiff may file a notice of voluntary dismissal with prejudice; (2) the parties may enter into a stipulation for dismissal with prejudice; (3) the parties may agree to an entry of judgment that may or may not contain provisions approving settlement and reserving jurisdiction to enforce the agreement; and (4) the parties may allow the underlying case to remain pending, awaiting performance of all obligations owed pursuant to the agreement. See Goldberg, Enforcement of Settlements: A Jurisdictional Perspective, The Florida Bar Journal. Whatever option the parties choose governs whether the trial court will hold continuing jurisdiction to enforce the settlement.
A settlement agreement is a contract subject to the usual rules of interpretation. If the terms and conditions are performed, this results in an accord and satisfaction and the agreement then substitutes the original dispute. When one party breaches the agreement, the non-breaching party may choose one of two options: (1) attempt to reinstate the original claims and assert that there was no valid accord and satisfaction; or (2) enforce the settlement agreement. If the non-breaching party chooses to enforce the settlement agreement, this becomes an action to assert a claim upon a new contract that did not exist when the court’s jurisdiction was initially invoked.
In Paulucci v. General Dynamics Corp., the Florida Supreme Court examined the issue of whether a trial court retains jurisdiction over a matter after the parties have entered into a settlement agreement. Paulucci v. General Dynamics Corp., 842 So. 2d 797 (Fla. 2003). In this case, the Florida Supreme Court answered the Fifth DCA’s certified question in the affirmative: “Does a court have jurisdiction to enforce a settlement agreement where the court has either incorporated the settlement agreement into a final judgment or approved the settlement agreement by order and retained jurisdiction to enforce its terms?” General Dyanics Corp. v. Paulucci, 797 So. 2d 18 (Fla. 5th DCA 2001).
First, the court reaffirmed prior precedent by stating the general rule that, following the entry of judgment, the trial court loses jurisdiction over the subject matter of the suit, but retains jurisdiction to enforce the judgment. Paulucci, 842 So. 2d at 801. However, the court held that “when a court incorporates a settlement agreement into a final judgment or approves a settlement agreement by order, the court retains jurisdiction to enforce the terms of the settlement agreement even if the terms are outside the scope of the remedy sought in the original pleadings.” Id. at 803. The extent of the court’s continuing jurisdiction to enforce the terms of the settlement agreement is limited by the terms of that agreement. Id. Therefore, “if a party is claiming a [general] breach of the agreement and is seeking general damages not specified in the agreement, the appropriate action would be to file a separate lawsuit.” Id. The Court distinguished the situation where the parties voluntarily dismiss the action without an order of the court, stating that when this path is taken and the parties neither present their agreement to the judge nor obtain an order of dismissal predicated on the agreement, a party will not be able to obtain enforcement of the agreement by filing a motion in the now-dismissed case if one of the other parties to the agreement breaches or objects. Id. at 802-03 (quoting MCR Funding v. CMG Funding Corp., 771 So. 2d 32 (Fla. 4th DCA 2000)).
To sum the holdings of Paulucci, here is a list of all scenarios that may arise when a court is faced with the issue of whether the court retained jurisdiction to enforce the settlement agreement:
- If the court enters final judgment before a settlement agreement is made, the court retains jurisdiction only to enforce the judgment.
- The filing of a stipulation of dismissal without an order expressly reserving jurisdiction will result in the court losing jurisdiction over the subject matter of the suit and will only have power to enforce the judgment. The court will not have jurisdiction to enforce any settlement agreement. This will require the filing of a separate action.
- If the court expressly approves of or incorporates the agreement into a final judgment and expressly reserves jurisdiction to enforce the agreement in its order of dismissal or judgment, the settlement may be enforced through a motion brought in the same action.
The keys to drafting enforceable settlement agreements are clear, material terms, mutuality, and the absence of ambiguity. Further, whether the court will retain continuing jurisdiction over a dispute concerning the settlement agreement depends on whether the court approves of or incorporates the agreement into its judgment, or whether the action is voluntarily dismissed without order or judgment from the court. Moreover, an attorney should avoid pitfalls in drafting, including obtaining express and clear settlement authority, and making sure, even in a time sensitive situation, to avoid ambiguities and generalities in the agreement. Finally, there are many other considerations to address when drafting not only an enforceable settlement agreement, but the best settlement agreement for your client, including the scope of released claims, the consideration of the agreement, confidentiality, and the express negation of liability or fault. Keeping all of these considerations in mind when drafting a client’s settlement agreement is a step in the right direction toward drafting an enforceable settlement agreement in Florida.