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COSA Sheds Light on Impact of Litigantsí Agreement in Principle to Settle a Case

Julie Ward v. Marjorie L. Lassiter
(January 13, 2017) Court of Special Appeals of Maryland

by Matthew J. McCloskey, Associate
Semmes, Bowen & Semmes (www.semmes.com)

Available at:http://www.mdcourts.gov/appellate/unreportedopinions/2017/1823s15.pdf

In a recent unreported opinion, the Court of Special Appeals of Maryland held that, by agreeing to settle a case in principle and at a certain amount, litigants enter into an enforceable agreement to execute mutual releases even if the terms of the ultimate release have not yet been negotiated at the time the settlement in principle is reached.

This case arose from an automobile accident involving Plaintiff and Defendant. The parties discussed settlement as the trial date approached, and Plaintiff’s attorney eventually informed Defendant’s attorney that Plaintiff would accept a settlement of $7,000. Defendant’s attorney responded: “We are settled at $ 7,000.00.” The parties had not, at that point, discussed any specific terms of the settlement.

The following day, Plaintiff emailed Defendant a proposed release. Defendant responded that the parties would have to use a release drafted by Defendant, and attached a new proposed release. Plaintiff revised Defendant’s release, in pertinent part, by: (1) removing language stating that Defendant would not be responsible “for future payments of all injury related medical expenses”; and (2) adding language limiting Plaintiff’s obligation to indemnify Defendant to $7,000. Defendant rejected Plaintiff’s revisions, and the parties soon reached an impasse regarding the language of the release. Defendant thereafter filed a Motion to Enforce Settlement, which was granted by the Court. The Court informed Plaintiff: “[I]n order to get your payment, you are going to have to sign a release. And if she doesn’t want to sign it, then she won’t get her $7,000.” Plaintiff appealed the Court’s decision granting Defendant’s motion.

Judge Douglas R. M. Nazarian, writing for the Court of Special Appeals, affirmed. The Court noted that there was no question that the parties agreed to settle this case for $7,000. Instead, the question presented to the Court was “what an agreement to settle an auto accident case involves, and thus, what terms the parties can be understood to have agreed to when they agreed to settle for $7,000.”

The Court found that, although the parties did not discuss a release, it was clear that “an agreement to settle pending litigation includes an agreement to execute mutual releases.” Even though the parties did not discuss the terms of the eventual release, and even though the failure to agree to an essential term normally means that no contract has been formed, the Court expressly found that “the parties’ unambiguously expressed intention to settle their lawsuit is, we find, a sufficiently definite expression of their intent, and assent, to achieve a state of litigation peace.”

Turning then to what constituted “litigation peace,” the Court addressed whether the terms of the parties’ settlement properly included Plaintiff being required to indemnify Defendant against Medicare claims. Here, it was clear that “litigation peace” meant that Defendant agreed to pay Plaintiff and Plaintiff agreed to extinguish her claims, “by release and indemnity.” Accordingly, the Court affirmed the trial court’s decision, effectively forcing Plaintiff to agree to the terms of Defendant’s release.