How to Settle a Commercial Case (And How Not To)

Settlements can be achieved at the strangest times. There are settlements which can be made over the telephone, in the office, on the courthouse steps, or while you are driving in your car. Seldom does a settlement occur at the optimum time. The key to achieving an enforceable settlement, whenever and wherever it may occur, is understanding how to properly document it.

1. When to Make a Settlement Offer and Demand (and when not to).

There is an art form to settling cases. Part of the art consists of, as poker players say, “when to hold em and when to fold em.” This takes experience and generally cannot be described in detail in the context of this article. However, there are several general rules which bear mention.

The worst time to discuss settlement is generally after a ruling on the Summary Judgment Motion. If you have won the motion, chances are that your opponent is likely not in the proper frame of mind to discuss settlement. If you lost the Motion, it is likely that you or your client will not be in the proper frame of mind. Try discussing settlement after the motion has been fully briefed but before argument and before it has been ruled upon. At this time, there is often uncertainty in the air. Uncertainty is one factor which often convinces litigants to resolve disputes. After all, a settlement will remove the uncertainty and take the decision out of the hands of the Court or the Jury which is often desirable.

I like to discuss settlement after an important deposition has gone well for my client’s case. Most lawyers know, instinctively, whether the deposition has helped their case or hurt their case. During depositions, the parties are often all together in the same room. This is often a good time to discuss a potential resolution of the case. However, as mentioned, settlements can be discussed in a variety of contexts and there is no hard and fast rule as to when to make a settlement offer or demand.
2. How to Make a Settlement Offer.
Written settlement offers are often helpful. However, there should always be a legend at the top of the letter which indicates “Privileged and Confidential Settlement Communication.” Similarly, I like to include the phrase in the body of the letter which says: “this settlement shall not be enforceable unless a written agreement is signed by all parties.” This statement will likely eliminate the possibility that opposing counsel may argue that there was a “meeting of the minds” as to “all material terms” and, therefore, the settlement, which has yet to be signed, is enforceable. The settlement cannot be enforceable if there is a caption on your letter or email which indicates that no such enforcement can take place until a settlement agreement is signed by everyone.
3. Are Client Signatures Required ?

There are several misconceptions about settlements under Florida law. The first is that all of the relevant parties must sign settlement documents. While this may be a requirement for an enforceable mediation settlement, client signatures are not necessarily required in order to enforce a settlement achieved outside of mediation. See Fla. R. Civ. P. 1.730; Gordon v. Royal Caribbean Cruises Ltd., 641 So.2d 515, 517 (Fla. 3d DCA 1994) (holding that a settlement agreement reached in mediation must be in writing and executed by both parties in order to be binding); see also Smiley v. Greyhound Lines, Inc., 704 So.2d 204, 204-06 (Fla. 5th DCA 1998) (enforcing a settlement agreement despite one party’s refusal to sign the release); State Farm Mut. Auto. Ins. Co., 781 So.2d 500, 502 (Fla. 3d DCA 2001) (noting that when all parties have agreed to the essential terms of a settlement, it will be enforced). Since email can be the preferred mode of communication in the modern world, many settlements can actually be achieved by email and may be enforced by a Court. See Miles v. Northwestern Mutual Life Ins. Co., 677 F.Supp.2d 1312, 1315 (M.D. Fla. 2009) (concluding that an email constituted a binding and enforceable settlement agreement). The key is not necessarily the mode of communication but, rather, the ability to demonstrate that there has been a meeting of the minds as to all of the material terms.

4. The Material Terms of the Settlement

So, what are the material terms? Monetary settlements in collection cases tend to be straightforward and easier to document. For example, if your client is suing for the repayment of money the settlement can be easily documented by making a determination as to how much is to be paid, when, and what happens if the payments are not made. Complicated settlements arise when the parties are required to do things such as return products, calculate amounts owed based upon future events and exchange releases. The more extensive the settlement terms, the more likely the Court is to find that the settlement has to be in writing and signed by the parties.

However, the courts have held that a settlement does not necessarily need to be signed by the parties to be enforceable. Settlements can be enforced based upon an email exchange between the lawyers if the Court finds that all of the “material terms” have been included as part of the email exchange. See Warrior Creek Dev., Inc. v. Cummings, 56 So.3d 915, 917 (Fla. 2d DCA 2011) (finding that an email contained the essential and material terms of the settlement and thus enforcing the settlement agreement); Blunt v. Tripp Scott, P.A., 962 So.2d 987, 989 (Fla. 4th DCA 2007) (the party seeking to enforce a settlement agreement must show that the opposing party agreed to all of the material terms).

Generally, the mere fact that the parties have not agreed to the scope of a release is not enough to prevent enforcement of the settlement. See BP Products N. Am., Inc. v. Oakridge at Winegard, Inc., 469 F. Supp. 2d 1128, 1133 (M.D. Fla. 2007) (holding that uncertainty as to nonessential terms in a settlement agreement will not preclude its enforcement); Sands v. Wagner & Hunt, P.A., No. 09-60557-CIV, 2009 WL 2730469, at *4 (S.D. Fla. 2009) (noting that the “scope of the release” is not an essential settlement term). Conversely, lack of client approval can often be a valid reason for a Court to decline enforcement. See Sharick v. Southeastern Univ. of Health Sciences, Inc., 891 So.2d 562, 565 (Fla. 3d DCA 2004) (a party seeking to compel enforcement of a settlement must prove that the attorney has the “clear and unequivocal” authority to settle on the client’s behalf); see also Baratta v. Homeland Housewares, LLC, No. 05-60187-CIV, 2007 WL 2668585, at *2 (S.D. Fla. 2007).
5.  How to Conclude a Settlement

If you want to conclude an enforceable settlement, treat it as an urgent matter. This is because the longer each side has to negotiate the terms of the settlement, the longer they will negotiate. Trading one draft of the settlement agreement per day is a very inefficient way to conclude the deal. I like to have meetings with opposing counsel in which it is agreed, in advance, that no one will leave until the principals have all signed the settlement agreement or reached an impasse. In this manner, you will be able to see whether the parties are serious about settlement or are simply blowing smoke.

One way to document a settlement is to put it on the record in Court or at deposition. Many settlements are achieved at deposition, during a hearing or even at trial. If there is a court reporter present, it is usually a good idea to announce a settlement on the record and explain the terms in as much detail as possible. If clients are present, have them affirm the terms of the settlement by indicating their agreement on the record. In this manner, the client will not be able to change their minds and the settlement will later be immune from challenge.
In real life, even the best meaning people sometimes get cold feet and change their minds. The best way to prevent this is through signatures of all parties or an announcement on the record.

Litigation concerning the enforcement of the settlement can be time-consuming and expensive. Be forewarned, however, the courts will enforce settlements even when a client signature is not present and even when the scope of releases to be exchanged is in doubt. The key to the enforcement of settlements is the same as the law that governs the enforceability contracts – whether the parties had a meeting of the minds as to all of the material terms of the deal.


The Author gratefully acknowledges the assistance of Jacob Epstein in the preparation of this Post.

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