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May v. Anderson9/22/2005
In this case, all parties agreed to the essential terms of a release in reaching a global settlement, but three parties later refused to execute the release document. We therefore consider whether the essential terms of a release are a material part of a settlement agreement, without which the settlement agreement is never formed, or whether the release's terms are inconsequential in determining whether the parties have reached a settlement agreement. We conclude that the release's essential terms are material and therefore required for an enforceable settlement agreement to exist. However, what is an essential release term necessarily varies with the nature and complexity of the case. Because a settlement contract is formed when the parties have agreed to its material terms, even though the exact language is finalized later, a party's refusal to later execute a release document after agreeing upon the release's essential terms does not render the settlement agreement invalid.
FACTS
On January 21, 2001, respondent Curtis Clint Anderson (Curtis) was driving a vehicle owned by his parents, respondents Darlene and Curtis L. Anderson (the Andersons), when he lost control, causing a rollover accident. Sebora Marie May, Angela Baffa, Peter Budahl, and Shemeela Sherow were passengers in the car. All of the passengers sustained injuries; Sebora Marie May's were fatal.
The Andersons were insured by California Casualty Indemnity Exchange (CCIE). Their policy covered liability for injuries up to $100,000 per person and $300,000 per occurrence.
All parties hired separate counsel shortly after the accident. Gilda and Wade May, individually, and Wade May as special administrator for the estate of Sebora Marie May (the Mays), hired attorney Ralph Schwartz. With the Mays' consent, Schwartz commenced negotiations for a global settlement of all the claims against Curtis and the Andersons arising out of the accident. CCIE offered to pay the full policy limit of $300,000 to the injured parties in exchange for a general release of all claims and a covenant not to sue. Schwartz agreed.
On September 5, 2001, Schwartz faxed a letter to the other parties' counsel, stating:
It is my understanding that we have reached an equitable division of Curtis Anderson's policy limits as follows:
$100,000.00
| $100,000.00
| $72,500.00
| $27,500.00
|
If the above distribution of settlement funds is acceptable, please sign below and return via fax to my office as soon as possible so that I may submit it to [the Andersons' attorney].
The other attorneys signed and returned the letter to Schwartz. Schwartz then faxed the signed letters to Curtis' and the Andersons' attorney. On one of the fax cover sheets, Schwartz wrote that he had attached the parties' consents to the distribution of the policy limits, and he requested that the Andersons' attorney immediately forward the release and settlement drafts.
The Andersons' attorney then sent letters to Peter's, Angela's and Shemeela's attorneys, along with Schwartz, confirming the settlement amount and including a full, final, and general release of all claims. Peter, Angela and Shemeela executed the documents and received payment from CCIE.
The Mays, however, refused to execute the documents or accept payment. The form of the general release was unacceptable to them because: (1) it did not contain an admission of liability by Curtis, and (2) it extinguished all claims and rights against Curtis and all pers
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