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Settlement Agreements Require Mutual Assent to All Terms

Erie Ins. Exch. V. Estate of Jeanne R. Reeside, et al.
No. 2941, Sept. Term 2009

by Lydia S. Hu, Esq., Associate
Semmes, Bowen & Semmes (www.semmes.com)

The Court of Special Appeals affirmed the trial court in declining to enforce a settlement agreement when the agreement was not reduced to writing and the mediator did not draft a memorandum memorializing the terms of the agreement at the end of a mediation session. In the underlying case, Plaintiff sought damages relating to a sewage flood at a residence. When the Washington Suburban Sanitary Commission (“WSSC”) refused to reimburse Plaintiff for the costs of clean-up and remediation, Plaintiff sought reimbursement from her homeowner’s insurance company, Erie Insurance Exchange (“Erie”).

In September 2007, a mediation session was held in which WSSC made a monetary offer. Erie would not contribute money and would not be released by the settlement agreement, but would be dismissed with prejudice. By e-mail dated October 2, 2007, Plaintiff’s counsel communicated to Erie and WSSC that the assignment clerk had been informed to stay the case for thirty (30) days pending settlement agreement.

In follow-up correspondence, the parties were unable to agree on all terms of the settlement agreement. Specifically, WSSC sought an indemnity clause in which Plaintiff would indemnify WSSC. Additionally, the Estate was not releasing or settling with Erie; however, the Estate agreed to dismiss Erie with prejudice from the lawsuit.

By November 2007, the parties continued to disagree about the indemnity clause. Plaintiff requested that the matter be put back on the trial rotation, and in April 2008, the Court of Special Appeals reinstated the action.

In January 2010, Erie filed a Motion to Enforce the Settlement. Erie argued that the email correspondence from Plaintiff’s counsel indicating that Erie would be dismissed from the action with prejudice demonstrated an agreement to settle with Erie. Erie was not seeking a release, as that was never contemplated; however, Erie was seeking to enforce the dismissal with prejudice. The trial court denied the motion, and Erie appealed.

Erie argued that there was no confusion or disagreement about Erie’s role in the settlement. Erie was not to contribute any funds towards settlement and would not be included in the release, but would be dismissed with prejudice from the case. The Court of Special Appeals conducted a de novo review and explained that settlement agreements are enforceable as contracts. General rules of contract construction apply.

Here, the intermediate appellate court determined that there was no final agreement executed. The mediation did not result in a written agreement, nor was there a memorandum prepared by the mediator confirming terms to which the parties agreed. The follow-up correspondence confirmed the numerous outstanding issues to which the parties could not agree and it was clear that at least the indemnity clause prevented mutual assent to the settlement agreement. Dismissal of Erie was contingent upon executing the settlement agreement. The parties never reached a “meeting of the minds” as to all of the terms of settlement. As such, Erie’s Motion to Enforce the Settlement Agreement was properly denied by the trial court according to the Court of Special Appeals.


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