Could Drafting — and Executing — a Good Settlement Agreement Be the Key to Being a Good Trial Attorney

Wisdom teaches that one should be as cautious at the end of an important endeavor as at the beginning. Somewhere between 90% and 95% of all civil cases are resolved prior to trial. In one article from 2017, it was estimated that about one percent of all federal civil cases are resolved by trial and somewhere less than twelve percent of California civil cases are resolved by trial.[1] Accordingly, a skilled civil litigator will know how to close out a case prior to trial, effectively and efficiently.

Moreover, the vast majority of civil cases will be resolved through a settlement agreement, reached through informal talks, mediation, or at settlement conferences. However, just because most civil cases will settle does not mean that one can take settlement talks lightly. Indeed, an attorney's preparation for the mediation session or settlement conference could be the most important work she does in pursuit of her client's interests.

From picking a mediator or settlement judge to crafting an effective settlement statement, much can (and has) been written on this subject. A recent case from March 2024 highlights one aspect of settlements, namely, the importance of preparing and finalizing the document that constitutes the parties' settlement agreement.

In BTHHM Berkeley, LLC v. Johnston, the First District Court of Appeal upheld the trial courts' order enforcing a settlement term sheet and entering judgment against the defendant Stewart Johnston.[2] The parties attended an all-day tele-mediation to try to settle their breach of contract dispute. At the end of the mediation, the parties entered into a term sheet that included all the relevant terms of the agreement, but which also stated that the parties agreed to execute a final settlement agreement at some future date.

After the mediation, Mr. Johnston had a change of heart and tried to walk-back the settlement. Mr. Johnston argued - first at the trial court and then before the court of appeal - that the term sheet was not a final, enforceable agreement because it omitted material terms and contemplated future negotiations (i.e., the parties would still execute a "final" settlement agreement). While both courts made short work of Mr. Johnston's arguments, he was able to bring a colorable challenge to the term sheet, delay the resolution of the case, and cause the opposing party to spend more in fees. This could have been easily prevented.

Before heading into a settlement negotiation (be it a mandatory settlement agreement or a mediation session) it is advisable to have a draft settlement agreement on hand that can be easily edited and finalized while all the parties are at the table. In such a settlement agreement, one can include standardized language regarding the finality and enforceability of such an agreement. And, the effective litigator should ensure that these - and all terms - all fully explained to and understood by each party.

If it is impossible to come to a settlement conference or mediation with a draft agreement ready to go, or if the parities have an extreme lack of trust of one another, many settlement judges, mediators, and superior courts have form settlement agreements that the parties can use and modify.

Don't get caught unawares because an agreement has been reached in principle - make sure the settlement agreement is complete and final before the parties go their separate ways. It could save everyone involved precious time, money, and peace of mind. Don't drop the chili on the way to kitchen.

[1] Jeffrey Q. Smith and Grant R. MacQueen, Going, Going, But Not Quite Gone: Trials Continue to Decline in Federal and State Courts. Does it Matter? Judicature, Vol. 101 No. 4 (2017) link.

[2] While this case was only certified for partial publication, it serves as an important cautionary tale on how a sloppy end to a settlement session can lead to further costly and unnecessary litigation.

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