Avoiding Incomplete Settlements

In Hill v. Hutchinson Care Center, L.L.C., et al., 2015 WL 5927073 (Kan. App. 2015), the parties executed a written document at the conclusion of a mediation that outlined the terms of the settlement including the amount to be paid by defendants to each plaintiff.  The agreement further specifically provided that the parties shall enter into a journal entry of dismissal with prejudice as to all plaintiffs, a general release and a joint and mutual confidentiality agreement.

The plaintiffs filed a motion seeking to enforce the written agreement as a valid and enforceable settlement agreement.  The defendants argued that the agreement was simply an agreement to make a contract in the future because the parties did not intend to be bound until their agreement was reduced to a formal writing containing the material terms of their settlement.  The court held that the handwritten agreement was in itself a valid and enforceable settlement agreement.

While acknowledging that the handwritten agreement provided for the subsequent execution of a journal entry of dismissal with prejudice, a general release and a joint and mutual confidentiality agreement, the court held that these are ordinary documents the parties agreed to submit to implement the settlement agreement.  The court emphasized that while the subsequent execution of the settlement documents was material to the agreement, the particular language of these standard documents was not material to the contract.  The court concluded that the handwritten agreement was in itself a valid and enforceable settlement agreement because it exhibited all the components that one would expect in a typical settlement agreement, namely material terms of agreement resolving the litigation upon the payment of specified settlement sums on certain dates to compensate the named plaintiffs.

The Hill court’s holding serves as a reminder to all defendants of the need to be precise when reaching the terms of any settlement agreement.  As Hill demonstrates, a defendant that simply agrees to an amount of a settlement in return for a promise to execute a release and confidentiality agreement in the future, without laying out in detail the terms of those agreements, does so at the risk of creating a valid and executable settlement agreement that does not contain all of the litigant’s desired terms.