What Is a Settlement Agreement?
A settlement agreement is a language document signed by the parties to a litigated dispute. Often, the settlement agreement is accompanied by a Stipulated Dismissal of lawsuit signed by the parties. With the document signed, litigants dismiss the case and obtain a stipulated judgment. This means that the parties agree with the court that it has jurisdiction to enforce the terms of the settlement agreement. A stipulated judgment is a court order, which means it can be enforced. Because the court acknowledges its authority to enforce the agreement, it is contractually enforceable. Thus, a party can bring a motion to enforce based on the terms contained in the stipulation.
In California, a stipulated judgment based on a settlement agreement is an entry of judgment on the terms of the settlement agreement. When the stipulation is signed, the terms are binding on the parties. Specific performance is a legal action to compel parties to execute the full extent of the parties’ agreement. A party can pursue a motion for specific performance in addition to any available remedies . Various California codes govern the enforcement of settlement agreements, including Civil Code Section 1541.
Mandatory mediation exists in some courts in California. In those cases when mediation is mandatory, a settlement agreement can be entered into at mediation. Following the settlement agreement, the parties can then file a Joint Request for Dismissal and entry of judgment, which renders the judgment stipulated rather than entered.
A portion of a settlement agreement may be unenforceable as a matter of law. A settlement agreement is void if it is against public policy. In other words, the agreement would be contrary to the interests of the public and free, independent action and judgment of the parties involved. Examples of prohibited settlements include those which restrain trade, real property interests, employment conditions, and the right to marry. A settlement agreement may also lack consideration, rendering it voidable. A settlement agreement generally requires consideration in the form of money, personal or real property, services, a release of liability, and other valuable consideration.
When to Bring a Motion to Enforce
In some instances, merely filing suit to enforce a settlement agreement is insufficient to compel compliance by the other side. In those cases, it may be necessary to file a motion to compel compliance in a pending action, or another judicial proceeding. Such a motion may be filed in the pending action that gave rise to the settlement agreement, or even in a separate action depending upon the circumstances of the case. There are a number of different California statutes that may serve as potential bases for motions to enforce settlement agreements.
Pursuant to California Code of Civil Procedure Section 664.6, the court may summarily enforce a settlement agreement if the terms have been placed on the record with both parties or their attorneys present. Similarly, under California Code of Civil Procedure Section 664.6 the court may summarily enforce a written settlement agreement if all of the parties who are to be bound have personally signed the writing. One of the advantages of bringing a motion pursuant to California Code of Civil Procedure section 664.6 is that no new party needs to be brought into litigation; the motion can be brought before the same judge in the same court who handled the underlying proceeding. Also, the motion may be brought at any time while the underlying litigation is pending, even if the underlying proceeding has been dismissed.
It is important to note that if costs and fees are requested pursuant to a provision of a settlement agreement they may not be recovered unless there is a statutory basis for the request. California Code of Civil Procedure Section 664.6 does not have an attorney’s fees provision. California Code of Civil Procedure Section 1021.5 on its face would not allow an award of attorney’s fees and costs, because the settlement was "private," however a court of appeal has held that under certain circumstances a settlement agreement may confer a "substantial benefit" on members of the public justifying an award under Section 1021.5. Fee awards made in connection with enforcement of a settlement agreement under California Code of Civil Procedure Section 664.6 may be made pursuant to the specific terms of the settlement agreement, or pursuant to the court’s inherent powers. Unlike section 1021.5, this does not require the settlement to be publicly beneficial. However, its application will be determined on a case by case basis.
Alternatively, the court may award fees pursuant to California Code of Civil Procedure Section 128.5 if the responding party refuses to comply with the settlement and makes no effort to meet and confer in good faith. If the court determines that the opposing party should have entered into the settlement (e.g., it was a good deal) it may award fees incurred in connection with seeking enforcement.
California Code of Civil Procedure Section 284, subdivision (a) provides for acceleration of appeal in cases of enforcement of a written settlement agreement. In a court of appeals case, where the agreement is contained in a written stipulation signed by counsel, a party is entitled to an immediate appeal from the judgment that enforces the settlement agreement.
A separate action may be filed to enforce a settlement agreement. This is appropriate if it would be difficult to enforce the settlement agreement in the action in which the settlement was made. For example, potentially complex issues of contract formation are unrelated to the actions in which the settlement was made; or where the settlement was reached after the original action was dismissed.
California’s Legal Criteria for Enforcement
Under some situations, a court in California will approve of a motion by one of the parties to enforce a settlement agreement prior to a lawsuit being filed. This typically occurs when both parties are attempting in good faith to reach an understanding and that there was a written instrument executed and one party has failed to comply with the terms. However, written agreements prior to filing a lawsuit often fail due to the "Statute of Frauds" under California Civil Code 1624 which mandates that all agreements must be written and signed by the party to be charged, with the intention to be an express agreement. This means if the defendant claims never to have signed the agreement, he or she can refute the agreement based on the Statute of Frauds and the court will not enforce it. Some courts have even gone so far as to say that an agreement purported to be a "settlement" is not a settlement until a settlement agreement is actually filed either in a court or a desk copy with the attorney of record and a formal Notice of Settlement is entered in the case. Contrary to this, more recent case law has suggested if the manifest intent of the written agreement is to settle the dispute and the parties also meet all the elements of an express contract, then the Statute of Frauds will not likely defeat a motion to "enforce" the purported settlement agreement. Except where the Statute of Frauds renders the settlement agreement unenforceable as a matter of law, the criteria necessary for the grant of such a motion existed long before the passage of section 664.6 of the Code of Civil Procedure. Most importantly, "[s]ettlement of disputed claims are normally favored and will be enforced if no sufficient reason appears to the contrary." The current law in California is no different, emphasizing that the "strong public policy in favor of settlement of disputes" will be maintained "where no substantial rights of third parties will be prejudiced." A settlement of such nature must have the required elements of an express contract, including an offer, acceptance and consideration.
Filing a Motion to Enforce
The process in California for filing a motion to enforce a settlement agreement, step-by-step, involves the following steps:
A. Initial Documents
1. Draft motion. You need to draft a Notice of Motion, supporting memorandum of points and authorities, declaration with attached exhibits (which normally is a copy of the settlement agreement), proposed order, and proposed judgment, if appropriate.
2. File the motion with the Court.
B. Serve the motion on the other parties to the action.
1. If ordered by the court, serve the motion on the parties to the contract who are not parties to the litigation. This can be service by mail, fax or email.
2. Other parties to the litigation need not receive notice if the court does not otherwise order. (See cases below where only parties to the litigation must receive notice of a motion.)
If the settlement agreement is not part of the initial pleadings, any person against whom enforcement is sought must be given notice and an opportunity to be heard. (Cal. Civ. Proc. § 664.6, Caddy v. Caddy (1981) 120 Cal. App. 3d 914, 916, Citing Settimi v. Del Conte (1980) 105 Cal. App. 3d 376.) In other words, the other parties must receive notice of the motion before they can be bound by it (unless they in fact have notice, and alone are beneficiaries of the settlement agreement, Schwartz v. Schwartz (1967) 253 Cal. App. 2d 67, 71).
C. Opposing party warns" that the only realistic way to oppose is to retain an Attorney to file an opposition.
D. Court hold hearing on the motion to enforce the settlement.
- If the other parties show up, oppose the motion and the Court is convinced that a good faith and reasonable belief exists that the parties will settle within a short time, the Court may continue the matter.
- If the other parties do not oppose the motion, the Court will grant the motion.
- If the court finds that the settlement agreement contains "unmistakable language" that the parties intended to make the terms enforceable, the motion may be granted by the court.
F. Prepare the order.
1. Draft order.
2. Submit to the court.
G. Then enter the judgment, if appropriate.
Objection and Non-Response: What to Do
Failure to Mediate or Refusal to Sign: These Are Common Pitfalls
The process of enforcing a settlement in California is not without its challenges. One of the primary obstacles to enforcement is the failure of one or both parties to come to the mediation ready to accept the mediator’s recommendations. Should any party refuse to sign a stipulated agreement, the original case can be revived and heard in court. When a trial is subsequently held, evidence can be submitted supporting the terms of the settlement, as well as why the refusal occurred. The court may also allow for additional evidence to support the settlement process, such as a copy of the mediator’s notes.
While a copy of the mediator’s notes can bolster your case, it will not make or break it. Notes made by the mediator are not binding and the court has no jurisdiction over them. The mediator is also not required to reveal their personal notes for review by either party. Given that a mediator cannot be compelled to produce their notes , it is important to have this documentation well before the actual mediation, and ideally at least a week prior to the mandated conference.
While it can be frustrating when another party refuses to mediate in good faith, legally speaking, there is not much that can be done. If one party refuses to sign the stipulated agreement, the only option is to ask for a trial before the court. Because California family law courts do not require mandatory mediation in these instances, there is no recourse for submitting a motion to compel mediation. However, if a stipulation to mediation exists, it is a good idea to submit a letter or other correspondence to the other party reminding them of their obligations to mediate in good faith.
While courts are becoming increasingly supportive of mediation efforts, they are not required to do so under California law. As a result, a judge or commissioner may waive the requirement for mediation.
The Value of Legal Counsel
Finding the right legal representation is key to a successful enforcement of the settlement agreement. Lawyers have the training, experience and expertise to competently navigate the California court system. They will first review the enforcement motion to determine whether it was appropriately filed with the correct venue, California court and in the proper manner. The lawyer will assess the quality of the existing settlement agreement and provide recommendations on how to boost its chances of success. The lawyer is then responsible for filing all necessary documents to initiate the process, painting the most accurate picture of events from start to finish to increase the odds of a favorable outcome in court during the hearing. Lawyers tend to help parties resolve issues before they become larger and after negotiations have dissolved. On multiple occasions, they have been able to work out agreements that prevent court proceedings altogether.
Case Studies in California
Here are some selected case studies and real-world examples of settlement agreement enforcement in California.
In a well-known case, Acosta v. City of Costa Mesa (2016) 45 Cal.4th 886, a former police officer’s strong non-compete agreement was not enforceable because his resignation and non-compete clause (which restricted his right to work in law enforcement) violated California’s public policy against restraints on individuals’ right to seek employment in certain fields.
In another celebrated case, Smith v. Pispo (2009) 172 Cal.App.4th 987, the plaintiff sued his former partner for breach of contract based on the non-compete agreement in their partnership agreement . Because the plaintiff failed to allege facts establishing that the defendant’s activities "undeniably harmed the public policy" and "are likely to do so in the future," the trial court sustained the defendant’s demurrer without leave to amend.
More recently, in Hernandez v. Ponce (2012) 206 Cal.App.4th 713, the California Court of Appeal affirmed a $7 million judgment awarded to a restaurant employee for her personal injury claims under the labor code, notwithstanding a settlement agreement between the parties. The court instructed that the employment agreement that the parties signed in order to settle the lawsuit was unenforceable under the law because it violates California’s public policy against non-compete agreements in employment contracts.