This post is about an approach to drafting settlement agreement releases that drives me nuts. But first, some context.
Much to the dismay of those of us who love trials, the fact is that most disputes — even the ones that progress as far as formal litigation — are resolved through settlement. And really, that’s a good thing. There are very few disputes that warrant the time and expense associated with litigation all the way through trial, although my sense is that some cases settle before trial because one or both of the attorneys is not especially skilled at trials and is therefore afraid of them. (Note: I am not one of those attorneys.)
When a dispute settles, there is usually a written settlement agreement (or at least, there should be) and there is often a formal release of claims, which is sometimes mutual. For now, let’s keep it simple — imagine a plaintiff who has a claim and a defendant who is going to settle the claim by paying some money to the plaintiff. A release is meant to reflect a pretty simple requirement of the defendant: “Hey plaintiff, you know that dispute that we had that we just resolved when I paid you all that money? Right, that one. Don’t sue me next week for the same thing. Okay?” Simple, right? And something that the defendant is certainly entitled to (and may be entitled to even if there were no formal release in place) (but that doesn’t mean you should try doing it that way).
So in theory, the formal release could simply say, “The Plaintiff agrees not to sue the Defendant for the claim we are resolving through settlement.” It would probably not be very professional to include the phrase “Duh.” in the formal agreement, but I suppose it’s implied.
Of course, lawyers are a … creative … breed. And whether it is because at some point in history some clever plaintiff pulled a fast one, or whether lawyers can simply imagine a wide range of fast ones that such plaintiff could pull (or, most likely, both), standard releases tend to include some extra words. Okay, a lot of extra words. One can envision a dialogue between a plaintiff clever enough to see a way around a simple release (but honest enough to ask permission rather than forgiveness) and the defense attorney drafting the agreement and doing a comedic slow burn as he is required to keep adding verbiage to address the plaintiff’s plans:
“Once the defendant is dead, can I sue his heirs?”
“This settlement just covers the claim, right? I can still sue for expenses, can’t I?”
“If I discover next week that in addition to the back injury, I also have a hurt neck, can I sue for that?”
“This was just a suit in law, right? So I can still sue in equity?”
“Hey, I’ve got an idea! Now that you’ve settled with me, can my wife sue for all of her damages?”
[And so on.]
The result is that the more-or-less standard language used in releases looks like this:
The RELEASOR hereby forever releases, acquits, and discharges the DEFENDANT and all of his heirs, successors, and assigns (collectively, the “RELEASEES” from any and all actions, causes of action, claims, demands, liability, suits, controversies, proceedings, and expenses, whether known or unknown, and from all other rights, demands, damages and liabilities of any kind or nature in law or equity, which the RELEASOR now has or may ever have had, from the beginning of the world to today, which arise directly or indirectly out of ________, or which were or could have been asserted in [THE LAWSUIT].
That language is from an actual release, and believe it or not, I even shortened it to make for a simpler illustration. Most litigators are so accustomed to this language that they can recite substantial portions of it from memory. And among some lawyers, it is a point of pride if they can “improve” on this language (i.e., lengthen it) by conjuring up other scenarios that must be addressed through the use of additional synonyms. They keep these model paragraphs deep in their word processing arsenal, anxiously awaiting the day when they will be called upon to supply not just any old release language, but the absolutely bullet-proof release language, which will so impress opposing counsel with its Dickensian verbosity that he will admit, out loud, that he sure is glad he’s settling rather than going to trial against an attorney with access to so formidable a thesaurus.
The easiest place to start inflating this language some more is with the definition of the RELEASEES, especially if it’s an entity rather than an individual. Imagine our clever little plaintiff wondering aloud, his eyes twinkling with delight, “I agreed not to sue the company for more money, sure, but did I agree not to sue its directors? Its officers? Its shareholders? Its agents?” The definition of “RELEASEES” grows with every imagined litigation target.
Here’s something that may surprise you (especially if you were hoping that you’re close to the end of this post): This is not the thing that drives me nuts that is the subject of this post. Because while usually this sort of bad (or at least pointless) over-lawyering creates problems for opposing counsel or the clients, in this case it’s mostly harmless and not worth fussing about. Generally speaking, this additional language doesn’t matter one bit, for two reasons:
1. In the unlikely event that there is a genuine dispute about whether a claim that has been asserted was, in fact, previously released, it is hard to imagine that the outcome of that dispute will turn on whether the release covered “causes of action” and “demands” or just “causes of action” (for example). I’m not saying that you don’t need to draft settlement language that carefully anticipates a subsequent dispute; I’m just saying the dispute is likely to be about a different bit of language, namely …
2. What’s really important is what’s in the blank.
Remember the most significant concept found in our bare-bone release: “The Plaintiff agrees not to sue the Defendant for the claim we are resolving through settlement.” How you define that claim is what really controls the scope of the release, and that’s the language that goes in the blank. Usually it’s a description of an accident, or a transaction, or a business relationship. And as long as it is limited to something pretty close to how the dispute started — expanded, a bit, to cover everything that the plaintiff could have made part of this round of fighting but elected not to — that’s just as it should be and is perfectly fair. Don’t come back to me next week with some other ailment from the accident, some new complaint about how we’ve calculated your compensation, or some other piece of the deal that was unfair. We’re done.
But, if there is some other dispute between these parties that isn’t captured by what goes in that blank, then defendant may have another lawsuit on his hands, and that’s what the attorney drafting the release is afraid of. So you need to draft that language carefully, accurately, and as broadly as possible, subject to negotiation with the attorney on the other side. Some lawyers, however, have developed a solution that doesn’t require them to do all that pesky thinking and negotiating. They just eliminate the blank.
The result is a “General Release” that functions as a real, you betcha, release of all claims. ALL claims. In simplest terms, it’s as if our original defendant said to our original plaintiff, “Hey plaintiff, you know that dispute that we had that we just resolved when I paid you all that money? Right, that one. Don’t sue me ever again for anything at all. Okay?”
Now, that may be a rational way to resolve a dispute, particularly if the parties are individuals going their separate ways, or at least wanting to move forward with a clean slate. And that’s a fine thing to have a settlement agreement and release reflect, if that’s the deal. The problem — and here we’re finally getting to the thing that drives me nuts — is the combination of this type of release with a very broad definition of who is being released, our RELEASEES. It’s fine for Peter Plaintiff to say that, having given it careful consideration, he has no other claims against Dudley Defendant. But if Dudley Defendant is actually Dudley Defense Enterprises, Inc., a Subsidiary of ACME Coyote-Killers International, and the RELEASEES are defined to include the company’s parents, affiliates, officers, directors, board members, and shareholders? Peter Plaintiff has absolutely no idea who he is agreeing not to sue. And while he may be willing to agree not to sue anyone at all for claims arising out of this particular car accident (or whatever else went in the blank), how can he agree not to sue all of those people for anything at all?
This problem arises when you have an intersection between a very broad definition of the party being released with an insufficiently narrow (or, worse, unlimited) scope of the claims being released. Often the party proposing such a lease has never thought it through, and stands by the pat answer of “That’s our standard release, and it’s not negotiable.” That makes for a difficult decision for the client, who thought the dispute was finally at an end and all that remained were some standard forms to sign. Maybe the Marx Brothers had the right approach.
Here’s a twist on the same problem that I experienced recently as a disputant, not an attorney (I was arguing in my spare time). The release had a very broad definition of the company (including officers, directors, shareholders, etc.), but a fairly reasonable scope of the claims I was releasing. So far, so good. But then it included a general non-disparagement provision, which basically said I couldn’t say anything bad about the company, which, by itself, is also fairly typical and reasonable. The problem was that the “company,” for purposes of the non-disparagement provision, was defined the same way it had been in the release, including the officers, directors, board members, shareholders, etc. About whom, exactly, am I not permitted to speak ill?
I pointed out to company’s representative that this provision was overly broad. I was told that it was the standard language, and that he couldn’t change it. I pointed out that I would have trouble complying with that provision, given that I didn’t know the identities of the people I was not permitted to disparage.
Did the company intend to provide me with a list, I wondered?
The company rep said that “obviously” that provision was only intended to apply to the company and people I had interacted with directly at the company. And that may be. But then why shouldn’t the agreement that I was signing say that?
This is the real cost of lazy lawyering. I now have an email from the company acknowledging that the actual words in the agreement do not reflect the true intent of the drafters, and that I am responsible for something less than what I appear to have agreed to in writing. If we end up in a dispute, and the words on the page no longer provide sufficient guidance to what I’ve agreed to (by the company’s admission!), that over-breadth could come back to bite them. Maybe. In theory.
Mostly, I just get annoyed when people who do this for a living have enough energy to add unnecessary words, but not enough energy to think through their implications. We owe our clients more than that. Otherwise, we are just perpetuating the stereotype.