Tuesday, August 7, 2007

Buyer's remorse not enough to vacate settlement

After age discrimination plaintiff Doreen Powell and her attorney agreed in open court on the terms of her settlement, she changed her mind and refused the sign the written agreement. She then filed a motion under Rule 60 to set aside the settlement and re-open the case. The district court said no, and the Court of Appeals (Winter, Walker and Sack) affirmed on August 7, 2007. The case is Powell v. Omnicom.

The Court of Appeals noted that not every settlement agreement has to be in writing; many are consummated in open court, where the parties unequivocally tell the judge that they agree with the terms of the agreement. Powell argued in this case that the open-court agreement was not enough and that she could revoke it by refusing to sign the written agreement. The Court explained:

Deciding whether the parties intended to be bound in the absence of a writing requires us to consider (1) whether there has been an express reservation of the right not to be bound in the absence of a writing; (2) whether there has been partial performance of the contract; (3) whether all of the terms of the alleged contract have been agreed upon; and (4) whether the agreement at issue is the type of contract that is usually committed to writing.

Under the totality of the circumstances, the Second Circuit held, Powell could not get around the in-court settlement agreement, and the settlement stands even though she did not sign the written agreement in protest of certain terms. The Court had no difficulty in finding that the first three factors were met as no one at the in-court settlement conference said they wanted a written agreement, and there was partial performance of the agreement in that the defendant had already drafted a letter of reference for plaintiff. What gave the Court of Appeals pause was whether "this agreement is the kind that would normally be reduced to writing."

Second Circuit precedents include a few cases holding that settlements involving future promises by the defendant should be in writing. This includes cases where the settlement is paid out over time or the parties agree that the former employer will handle future requests for employee references in a certain way. Powell v. Omicom resembled those cases, but the Circuit distinguished them because, this time around, "the terms of this this agreement were announced on the record and assented to by the plaintiff in open court."

One final twist here was Powell's reliance on the Older Worker's Benefit Protection Act, which gives age discrimination plaintiffs 21 days to walk away from a settlement agreement. The Court of Appeals observed that that law does not apply to cases that were already filed in court, like Powell's case. It only applies when the parties resolve their claim prior to any lawsuit. For cases filed in court, the question is whether the plaintiff had a "reasonable" period of time to consider the settlement. The Second Circuit said "yes" to that question, as Powell -- a sophisticated business woman -- "had nearly two years between her termination and settlement negotiations to give considered thought to how she wished to resolve this dispute." Although the Older Worker's Benefit Protection Act aims to prevent employees from settling their cases under the shock of termination, Powell was not under time-pressure to settle.

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